During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. What is the value of ending inventory under absorption costing?
A) $60,000
B) $110,000
C) $50,000
D) $250,000
B) $110,000
Explanation: $5 + $3 + $4 + ($250,000/25,000 units) = $22 per unit × 5,000 units = $110,000.
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