Outdoor Devices Inc. manufactures sport hunting equipment. The company's operations had the following results for 2019. Actual production volume approximated normal levels. F = favourable variance, meaning actual costs were below standard; U = unfavourable variance, meaning actual costs exceeded standard. Assume all variances are considered to be material.

\begin{array} { l l } \text { Item } & \text { Standerd Cost } \\\text { Raw materials, at standard cost } & \$ 220,000 \\\text { Production wayes, at standard cost } & 719,000 \\\text { Variable production overhead, at standard cost } & 310,000 \\\text { Fixed production overhead, at standard cost } &\underline{ \text {825,000 }} \\\text { Total production cost, at standard cost } &\underline{ \$ 2074,000}\end{array}

Raw material variance

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47,000 U
Labour variance

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22,000 F
Variable overhead variance

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3,100 F
Fixed overhead variance

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59,000 F
Net variance

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80,900 U Required:
a. Determine the amount that Outdoor should include in the cost of inventories produced in the year.
b. If actual production volume were higher than normal, what would be the effect on the cost of inventories on a per unit basis? What if actual production volume were lower than normal?

Which Statement Best Depicts the Inventory Cost Flow Equation

Multiple Choice

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