Question
XYZ Co. uses normal job costing. The firm does not prorate over/under allocated MOH and uses first-in-first-out (FIFO) inventory flow. In 2019, they had the
XYZ Co. uses normal job costing. The firm does not prorate over/under allocated MOH and uses first-in-first-out (FIFO) inventory flow. In 2019, they had the following costs:
DM $9 per unit
DL $3 per unit
VMOH $4 per unit allocated; $120,000 actually spent
FMOH $80,000 actual (with absorption costing FMOH was allocated using a rate of $3 per unit)
Variable selling costs (also called operating costs) $3 per unit sold
Fixed administrative costs (also called operating costs) $70,000
At the beginning of 2019, XYZ had no work in process (WIP) but had 3,000 units in finished goods inventory. Each of these units had a cost of $13 using variable costing but a cost of $15 using absorption costing. During 2019, XYZ produced 34,000 units and sold 30,000 units. There was no ending WIP.
1. What is the value of ending finished goods inventory for 2019 if XYZ Co. uses variable costing?
2. What is the value of ending finished goods inventory for 2019 if XYZ Co. uses absorption costing?
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