The Difference Between the Variable Ending Inventory Cost and the Absorption

question 2

Multiple Choice

The difference between the variable ending inventory cost and the absorption ending inventory cost is:

• A)800 units times $15 per unit indirect manufacturing cost.
• B)800 units times $10 per unit material cost.
• C)800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost.
• D)800 units times $20 per unit variable conversion cost plus $15 per unit indirect manufacturing cost plus $16.67 per unit indirect operating costs.

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Definitions:

Consignee

The individual or entity to whom goods are shipped and who is responsible for receiving the shipment and completing any customs paperwork.

Ending Inventory

The value of goods that remain unsold at the end of an accounting period.

Cost Flow Assumption

An accounting method used to value inventory and determine the cost of goods sold, such as FIFO (First In, First Out) or LIFO (Last In, First Out).

LIFO

"Last In, First Out" method of inventory valuation where the most recently produced items are recorded as sold first.