Inventory Valuation under Absorption and Variable Costing with Decrease in Ending Inventory The following information pertains to Chacon Inc. for last year: Required: 1. Calculate the cost of one unit of product under absorption costing. 2. Calculate the cost of one unit of product under variable costing. 3. How many units are in ending inventory? 4. Calculate the cost of ending inventory under absorption costing. 5. Calculate the cost of ending inventory under variable costing.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.