Asked by Nicholas Malmquist on Apr 26, 2024
Verified
Under absorption costing, the cost of goods sold for the year would be:
A) $258,400
B) $394,400
C) $353,600
D) $398,400
Absorption Costing
A method of inventory costing in which all costs of production (both variable and fixed) are treated as product costs.
Cost Of Goods Sold
An accounting term representing the direct costs attributable to the production of goods sold by a company, including materials and labor.
- Examine the effect of constant manufacturing overhead costs on the valuation of inventory and the net income from operations.
Verified Answer
TA
Theodora AmorkorMay 01, 2024
Final Answer :
B
Explanation :
Under absorption costing, the cost of goods sold includes both variable and fixed manufacturing costs. Therefore, we need to add up the total manufacturing costs (both variable and fixed) for the year, which are:
Direct materials - $60,000
Direct labor - $90,000
Variable manufacturing overhead - $72,000
Fixed manufacturing overhead - $172,000
Total manufacturing costs = $394,000
Then, we subtract the ending inventory from the total manufacturing costs to get the cost of goods sold:
$394,000 - $600 = $393,400
The closest answer choice is B, which is $394,400.
Direct materials - $60,000
Direct labor - $90,000
Variable manufacturing overhead - $72,000
Fixed manufacturing overhead - $172,000
Total manufacturing costs = $394,000
Then, we subtract the ending inventory from the total manufacturing costs to get the cost of goods sold:
$394,000 - $600 = $393,400
The closest answer choice is B, which is $394,400.
Explanation : 
Reference: CHO7-Ref23
Baraban Corporation has provided the following data for its most recent year of operation:
Reference: CHO7-Ref23Baraban Corporation has provided the following data for its most recent year of operation:
Learning Objectives
- Examine the effect of constant manufacturing overhead costs on the valuation of inventory and the net income from operations.