Question

Fast Track Auto produces and sells an auto part for $60 per unit. In 2017, 120,000 parts were produced and 75,000 units were sold. Other information for the year includes:

Direct materials= $20 per unit
Direct manufacturing labor= $5 per unit
Variable manufacturing costs= $3 per unit
Sales commissions= $7 per part
Fixed manufacturing costs= $760,000 per year
Administrative expenses, all fixed= $270,000 per year.
What is the inventoriable cost per unit using variable costing?

Answer 1

The inventoriable cost per unit using variable costing for Fast Track Auto, which includes direct materials, direct manufacturing labor, and variable manufacturing costs, is $28 per unit.

Step-by-step explanation:

Calculating Inventoriable Cost Using Variable Costing

To calculate the inventoriable cost per unit using variable costing, we need to consider all the variable costs associated with producing a product. In the case of Fast Track Auto, the variable costs include direct materials, direct manufacturing labor, and variable manufacturing costs. Fixed manufacturing costs and administrative expenses are not included in variable costing. Therefore, the calculation for inventoriable cost per unit is as follows:

• 
  
• Direct materials: $20
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• Direct manufacturing labor: $5
• 
  
• Variable manufacturing costs: $3

Adding these costs together, we obtain an inventoriable cost of $28 per unit ($20 + $5 + $3).