Help Save Exit Sierra Company incurs the following costs to

Help Save & Exit Sierra Company incurs the following costs to produce and sell ts only product Variable costs per unit: 10 Labor Variable manufacturirig overhead Variable selling and administrative expenses Fixed costs per yeari Fixed manufacturing overhead Fixed selling and administrative expenses $58,00o 310,000 During this year, 29,000 units were produced and 24,500 units were sold. The Finished Goods inventory account at the end of this year shows a balance of $99,000 for the 4,500 unsold units. Required: 1-a. Calculate this years ending balance in Finished Goods inventory two ways-using variable costing and using absorption costing. 1-b. Does it appear that the company is using variable costing or absorption costing to assign costs to the 4,500 units in Goods inventory? that the company wishes to prepare this year\'s financial statements for its stockholders. a. Is Finished Goods invent b. What balance should be reported ory of $99,000 the correct amount to include on the balance sheet for external reporting purposes? in the Finished Goods inventory account for external reporting purposes? Complete this question by entering your answers in the tabs below Req 18 Req 2A Req 28 Req 1A Calculate this year\'s ending balance in Finished Goods inventory two ways-using variable costing and using absorption

Solution

1.a

1.b Company is valuing Inventory using Variable Costing to assign costs to inventory

2.a For external reporting purpose, absorption costing is to be used to value the inventory. Hence the finished goods invntory value of $99,000 is not correct amount to be included on the balance sheet for external reprting purposes.

2.b. The correct balance to be reported is $108,000 for the Finished Goods Inventory for external reporting purposes.

Chuck Wagon Grills

1.

Inventory Value using Variable Costing
Variable costs per unit
Direct Material	10.00
Direct Labor	8.00
Variable manufacturing overhead	4.00
Total variable cost per unit	22.00
Number of units in closing inventory	4,500
Total value of Inventory under Variable costing	99,000
Inventory Value using Absorption Costing
Variable costs per unit
Direct Material	10.00
Direct Labor	8.00
Variable manufacturing overhead	4.00
Total variable cost per unit (A)	22.00
Fixed Manufacturing overhead (B)	58,000.00
No of units produced (\"C)	29,000
Fixed Manufacturing overhead per unit (D=B/C)	2.00
Cost of Goods manufacture per unit (E=A+D)	24.00
Number of units in closing inventory (F)	4,500
Total value of Inventory under Absorption costing (G= E*F)	108,000