Question

A company produces a single product. Variable production costs are $13.40 per unit and variable selling and administrative expenses are $4.40 per unit. Fixed manufacturing overhead totals $50,000 and fixed selling and administration expenses total $54,000. Assuming a beginning inventory of zero, production of 5,400 units and sales of 4,300 units, the dollar value of the ending inventory under variable costing would be:_____.

a. $14,740.
b. $24,640.
c. $19,580.
d. $9,900.

Answer 1

Ending inventory= $19,580

Step-by-step explanation:

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

We need to calculate the total unitary variable cost:

Total unitary variable cost= 13.4 + 4.4

Total unitary variable cost= $17.8

Now, the cost of ending inventory:

Ending inventory= 1,100*17.8

Ending inventory= $19,580