Question: Sierra Company incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead $12 8 4 Variable selling and administrative expenses 4 Fixed costs per year: Fixed manufacturing overhead $93,750 Fixed selling and administrative expenses 315,000 During the last year, 31,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $144,000 for the 6,000 unsold units. Required: 1. Determine whether the company is using absorption costing or variable costing to cost units in the Finished Goods inventory account. 2. Calculate the ending balance in the Finished Goods inventory account under. ⚫ a) variable costing. • b) absorption costing. 3. Prepare financial statements for the year, to issue to its stockholders. 4. At what dollar amount should the 6,000 units be carried in the inventory, for external reporting purposes?
Question: Sierra Company incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead $12 8 4 Variable selling and administrative expenses 4 Fixed costs per year: Fixed manufacturing overhead $93,750 Fixed selling and administrative expenses 315,000 During the last year, 31,250 units were produced and 25,250 units were sold. The Finished Goods inventory account at the end of the year shows a balance of $144,000 for the 6,000 unsold units. Required: 1. Determine whether the company is using absorption costing or variable costing to cost units in the Finished Goods inventory account. 2. Calculate the ending balance in the Finished Goods inventory account under. ⚫ a) variable costing. • b) absorption costing. 3. Prepare financial statements for the year, to issue to its stockholders. 4. At what dollar amount should the 6,000 units be carried in the inventory, for external reporting purposes?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Question:
Sierra Company incurs the following costs to produce and sell a single product:
Variable costs per unit:
Direct materials
Direct labor
Variable manufacturing overhead
$12
8
4
Variable selling and administrative expenses 4
Fixed costs per year:
Fixed manufacturing overhead
$93,750
Fixed selling and administrative expenses 315,000
During the last year, 31,250 units were produced and 25,250 units were sold.
The Finished Goods inventory account at the end of the year shows a balance of $144,000
for the 6,000 unsold units.
Required:
1. Determine whether the company is using absorption costing or variable costing to cost
units in the Finished Goods inventory account.
2. Calculate the ending balance in the Finished Goods inventory account under.
⚫ a) variable costing.
•
b) absorption costing.
3. Prepare financial statements for the year, to issue to its stockholders.
4. At what dollar amount should the 6,000 units be carried in the inventory, for external
reporting purposes?
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