Exercise 20-1

Variable Costing for Management Analysis Warren / Reeve / Duchac Exercise 20-1 solution

Inventory valuation under absorption costing and variable costing.
At the end of the first year of operations, 5,200 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows:

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.

Absorption costing $323,960
Variable costing $294,840