Question

Ellis enterprises has computed the following unit costs for the year just ended: direct material used 12, direct labor18, variable manufacturing overhead 25, fixed manufacturing overhead29, variable selling and administrative cost 10, fixed selling and administrative cost17. Under variable costing, each unit of the company's inventory would be carried at _______.

Answer 1

To calculate the unit cost under variable costing, we add the direct materials ($12), direct labor ($18), and variable manufacturing overhead ($25), which totals to $55 per unit.

Step-by-step explanation:

To calculate the unit cost under variable costing for Ellis Enterprises, we need to consider only the costs that vary with production levels which include direct materials, direct labor, and variable manufacturing overhead, while excluding any fixed costs.

The given costs are direct materials at $12, direct labor at $18, and variable manufacturing overhead at $25 per unit. Therefore, to calculate the unit cost under variable costing, we add these variable costs.

Direct Material: $12

Direct Labor: $18

Variable Manufacturing Overhead: $25

Total Variable Cost (per unit): $12 + $18 + $25 = $55

The variable selling and administrative cost is not included in the product cost under variable costing. It is treated as a period expense and not as part of inventory costs. Hence, under variable costing, each unit of the company's inventory would be carried at $55.