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Sparn Limited incurs the following costs to produce and sell a single product: $ 21 14 5 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 131,200 518,700 During the last year, 32,800 units were produced and 27,300 units were sold. The Finished Goods Inventory account at the end of the year shows a balance of $220,000 for the 5,500 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 O Variable costing 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,5,500 units 2. Assume that the company wishes to prepare financial statements for the year to issue to its shareholders a. Is the $220,000 figure for finished goods inventory the correct amount to use on these statements for external reporting purposes? Yes ONo b. At what dollar amount should the 5,500 units be carried in inventory for external reporting purposes? Finished goods inventory account

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