Revolution Hardware Reported $300, 000 of Inventory on December 31

question 9

Essay

Revolution Hardware reported $300, 000 of inventory on December 31, 2010, based on a physical count.
Additional information is as follows:
Required:
Compute the correct amount of December 31, 2010, ending inventory for Revolution Hardware.

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Definitions:

Income Change

Income change refers to any variation, either an increase or decrease, in the amount of revenue or profit that an entity receives over a period.

Variable Costing

An approach to costing that accounts for only variable production expenses, including direct materials, direct labor, and variable manufacturing overhead, in the calculation of product costs.

Absorption Costing

A costing approach that consolidates every expense related to manufacturing - direct materials, direct labor, and both variable and fixed overheads - into the product’s price.

Variable Production Costs

Costs that change in proportion to the level of production activity, such as materials and labor directly involved in manufacturing.