Sparn Limited Incurs the following costs to produce and sell a single product:

During the last year, $53,300$ units were produced and $47,000$ units were sold. The Finished Goods Inventory account at the end of the

year shows a balance of $$327,600$ for the $6,300$ unsold units.

Required:

$1-$a$.$ Is the company using absorptlon costing or varlable costing to cost units In the Finished Goods Inventory account?

Absorption costing

Varlable costing

$1-$b$.$ Show computatlons to support your answer.

$2$ Assume that the company wishes to prepare financlal statements for the year to issue to Its shareholders.

a$.$ Is the $$327,600$ figure for finlshed goods Inventory the correct amount to use on these statements for external reporting purposes?

Yes

No

b$.$ At what dollar amount should the $6,300$ units be carrled In Inventory for external reporting purposes?