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# Ending finished goods inventory and operating income

J&G Enterprises the following information related to the current years operations

Units produced 75,000
Standard production volume (units) 75,000
Units sold 50,000
Selling price per unit \$95.00
Units in beginning inventory 0
Direct materials used \$450,000
Direct labor \$1,125,000
Variable 900,000
Fixed 750,000
Variable 800,000
Fixed 300,000

6. Assuming that J&G uses absorption costing, what is the ending finished goods inventory?
a. \$1,075,000
b. \$1,175,000
c. \$1,375,000
d. \$1,575,000
e. \$1,875,000

7. Assuming now that J&G uses direct (variable) costing, what is the operating income?
a. \$1,000,000
b. \$1,250,000
c. \$1,500,000
d. \$1,800,000
e. \$2,300,000

#### Solution Preview

6. In absorption costing all manufacturing costs are a part of inventory. Total manufacturing cost is 450,000+1,125,000+900,000+750,000= 3,225,000
Cost per ...

#### Solution Summary

The solution explains how to calculate the ending finished goods inventory and operating income

\$2.19