25. Sparn Limited incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials $ 29 Direct labour 14 Variable manufacturing overhead 3 Variable selling and administrative expenses 5 Fixed costs per year: Fixed manufacturing overhead 404,800 Fixed selling and administrative expenses 554,200 During the last year, 50,600 units were produced and 32,600 units were sold. The Finished Goods Inventory account at the end of the year shows a balance of $276,000 for the 6,000 unsold units.

Required:

1-a. Is the company using absorption costing or variable costing to cost units in the Finished Goods Inventory account? multiple choice 1 Absorption costing Variable costing

1-b. Show computations to support your answer.

2. Assume that the company wishes to prepare financial statements for the year to issue to its shareholders.

a. Is the $276,000 figure for finished goods inventory the correct amount to use on these statements for external reporting purposes?

Yes or No

b. At what dollar amount should the 6,000 units be carried in inventory for external reporting purposes?