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Sparn Limited incurs the following costs to produce and sell a single product: Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses 18 7 5 5 222,500 520,600 During the last year, 44,500 units were produced and 27.400 units were sold. The Finished Goods Inventory account at the end of the year shows a balance of $168,000 for the 5,600 unsold units, Required: 1-a. Is the company using absorption costing or variable costing to cost units in the Finished Goods Inventory account? Absorption costing Variable costing 1-b. Show computations to support your answer. 1-b. Show computations to support your answer. Variable Costing Absorption Costing Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Unit product cost Total cost, 5.600 units 2. Assume that the company wishes to prepare financial statements for the year to issue to its shareholders a. Is the $168,000 figure for finished goods inventory the correct amount to use on these statements for external reporting purposes? Yes No 2. Assume that the company wishes to prepare financial statements for the year to issue to its shareholders, a. Is the $168,000 figure for finished goods inventory the correct amount to use on these statements for external reporting purposes? Yes No b. At what dollar amount should the 5,600 units be carried in inventory for external reporting purposes? Inventory value for external reporting purposes

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