Exercise $6-13($Algo$)$ Inferring Costing Method; Unit Product Cost $[$L$06-1]$

Sierra Company incurs the following costs to produce and sell its only product.

Variable costs per unit:

Direct materials

Direct labor $$10$

Variable manufacturing overhead $$8$

Variable selling and administrative expenses $$3$

Fixed costs per year:

$$6$

Fixed manufacturing overhead

During this year, $31,750$ units were produced and $24,500$ units were sold. The Finished Goods inventory account at the end of this year shows a balance of $$152,250$ for the $7,250$ unsold units.

Required:

$1-$a$.$ Calculate this year's ending balance in Finished Goods inventory two ways$-$using variable costing and using absorption costing. $1-$b$.$ Does it appear that the company is using variable costing or absorption costing to assign costs to the $7,250$ units in its Finished Goods inventory?

$2.$ Assume that the company wishes to prepare this year's financial statements for its stockholders.

a$.$ Is Finished Goods inventory of $$152,250$ the correct amount to include on the balance sheet for external reporting purposes?

b$.$ What balance should be reported in the Finished Goods inventory account for external reporting purposes?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Req $1A$

Calculate this year's ending balance in Finished Goods inventory two ways$-$using variable costing and using absorption costing. $($Round intermediate calculation to the nearest dollar amount.$)$

$\backslash$table$[[,\backslash$table$[[$Ending Balance$],[$in Finished$],[$Goods$]]],[$Variable costing,$$,21x$