Question
Power Inc. manufactures audio speakers. The variablecost per speaker is as follows: Direct materials $ 3.50 Direct labour 1.75 Variable manufacturing overhead 1.25 Sales commission
Power Inc. manufactures audio speakers. The variablecost per speaker is as follows:
Direct materials $ 3.50
Direct labour 1.75
Variable manufacturing overhead 1.25
Sales commission 0.75
Total variable cost per speaker $ 7.25
All other costs are fixedand include selling costs of $75,000 per year, administrative costs of $45,000 annually and fixed manufacturing overhead of $270,000 per year. There was no beginning WIP or finished goods inventory. During the past year, a total of 50,000 speakers were manufactured, and 45,000 speakers were sold at $25.00 each.
What would the cost of the ending finished goods inventory be under absorptioncosting?
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