Problem - The Jarvis Company Manufactures and markets a single product. The following data are available:
- In 20_5, variable manufacturing costs were $3 per unit.
- The standard production rate is 10 units per machine hour; that is, each unit takes 0.1 hours. The company produced 550,000 units during the year.
- Total fixed manufacturing costs were $440,000. Fixed manufacturing overhead was allocated using 55,000 machine hours as the basis.
- The selling price is $5 per unit.
- Variable marketing and administrative costs, which are driven by units sold, were $1 per unit. Fixed marketing and administrative costs were $120,000.
- Sales in 20_5 were 540,000 units.
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Gross Margin Statement
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Revenues
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$2,700,000
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Costs
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$2,090,000
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Gross Margin
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$610,000
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Mgmt, Marketing
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$660,000
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Profit Before taxes
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($50,000)
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Gross-margin based income statement (income statement as would be prepared under GAAP) to compute the income before taxes for 20_5. What is the value of the inventory of finished goods under this approach?