Trio Company reports the following information for the current year, which is its first year of operations.

Trio Company reports the following information for the current year, which is its first year of operations.
 

Direct materials	$	11	per unit
Direct labor	$	16	per unit
Overhead costs for the year
Variable overhead	$	45,000	per year
Fixed overhead	$	90,000	per year
Units produced this year		22,500	units
Units sold this year		16,500	units
Ending finished goods inventory in units		6,000	units

Explanation

1.
Fixed overhead ($90,000/22,500 units) = $4 per unit
Variable overhead ($45,000/22,500 units) = $2 per unit

2.
Cost of ending finished goods inventory using absorption costing:
6,000 units × $33 per unit = $198,000

3.
Cost of ending finished goods inventory using variable costing:
6,000 units × $29 per unit = $174,000

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