At the end of the first year of operations, 21,500 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows: Direct materials $30
Direct labor 18
Fixed factory overhead 22
Variable factory overhead 14

Required:
Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept.

Answer and Explanation:

The computation of the cost of the finished goods inventory reported is as follows:

Absorption costing is

= ($30  + $18 + $22 + $14) × 21,500 units

= $1,806,000

And,

Variable costing is

= ($30 + $18 + 14) × 21,500

= $1,333,000

In this way the cost of the finished goods inventory should be determined

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.

answer; signaling;