This year Amber opened a factory to process and package landscape mulch. At the end of the year, Ambers accountant prepared the following schedule for allocating manufacturing costs to the mulch inventory, but her accountant is unsure of what costs need to be allocated to the inventory under UNICAP rules. Approximately 20 percent of management time, space, and expenses are spent on this manufacturing process. At the end of the year, Ambers accountant indicated that the business had processed 10,600 bags of mulch but only 2,120 bags remained in the ending inventory.

What is Ambers tax basis in her ending inventory after applying the UNICAP rules to allocate indirect costs to inventory? (Assume direct costs are allocated to inventory according to the level of ending inventory. In contrast, indirect costs are first allocated by time spent and then according to level of ending inventory.

		Costs	Tax Inventory
Material:	Mulch and packaging	$8,200
	Administrative supplies	650
Salaries:	Factory labor	12,700
	Sales & advertising	5,150
	Administration	5,950
Property taxes:	Factory	9,000
	Offices	5,000
Depreciation:	Factory	12,200
	Offices	3,800
	Total		$0.00