To determine the cost of the company's ending inventory using absorption costing, we will follow these steps:
### Step 1: Determine the Fixed Manufacturing Overhead Cost Per Unit
The total fixed manufacturing overhead for the year is [tex]$300,000, and the company produced 10,000 units. Therefore, the fixed manufacturing overhead cost per unit is:
\[ \text{Fixed MOH per unit} = \frac{\$[/tex]300,000}{10,000 \text{ units}} = \[tex]$30 \text{ per unit} \]
### Step 2: Determine the Total Production Cost Per Unit
We need to sum up all the variable costs (direct materials, direct labor, and variable manufacturing overhead) and the fixed manufacturing overhead cost per unit to calculate the total production cost per unit.
- Direct materials cost per unit: \$[/tex]77
- Direct labor cost per unit: \[tex]$50
- Variable manufacturing overhead cost per unit: \$[/tex]10
- Fixed manufacturing overhead cost per unit: \[tex]$30
The total production cost per unit is:
\[ \text{Total production cost per unit} = \$[/tex]77 + \[tex]$50 + \$[/tex]10 + \[tex]$30 = \$[/tex]167 \]
### Step 3: Determine the Number of Units in Ending Inventory
The company produced 10,000 units and sold 9,000 units, so the number of units in ending inventory is:
[tex]\[ \text{Ending inventory units} = 10,000 \text{ units} - 9,000 \text{ units} = 1,000 \text{ units} \][/tex]
### Step 4: Calculate the Cost of the Ending Inventory
To find the total cost of the ending inventory, we multiply the number of units in ending inventory by the total production cost per unit:
[tex]\[ \text{Cost of ending inventory} = \text{Ending inventory units} \times \text{Total production cost per unit} \][/tex]
[tex]\[ \text{Cost of ending inventory} = 1,000 \text{ units} \times \$167 = \$167,000 \][/tex]
### Conclusion
The cost of the company's ending inventory using absorption costing is \$167,000.
