Question

The Southern Corporation manufactures a single product and has the following cost structure: Variable costs per unit: Production $ 35 Selling and administrative $ 14 Fixed costs per year: Production $216,300 Selling and administrative $190,340 Last year, 7,210 units were produced and 7,110 units were sold. There was no beginning inventory. The carrying value on the balance sheet of the ending inventory of finished goods under variable costing would be:

Answer 1

The carrying value of the ending inventory under variable costing is calculated by multiplying the production variable cost per unit ($35) by the number of units remaining in inventory (100), resulting in $3,500.

Step-by-step explanation:

To calculate the carrying value of the ending inventory under variable costing, we must consider only the variable costs associated with the production of the units that remain in inventory. Since 7,210 units were produced and 7,110 units were sold, this leaves 100 units in inventory (7,210 produced - 7,110 sold).

The variable costs per unit for production are given as $35. We do not include the variable selling and administrative costs for the units that have not been sold. Therefore, the carrying value of the ending inventory will be the production variable cost per unit multiplied by the remaining units in inventory.

Carrying Value of Ending Inventory = Variable Cost per Unit × Units in Ending Inventory = $35 × 100 = $3,500.

Answer 2

$3,500

Step-by-step explanation:

Under variable costing method, product costs are calculated on variable manufacturing costs only.

Step 1 : Determine unit Product Cost

Product Cost = Variable Manufacturing Costs

= $ 35

Step 2 : Determine the units in Inventory

Units in Inventory = Opening Stock + Production - Sales

= 0 + 7,210 - 7,110

= 100 units

Step 3 : Determine Inventory value

Inventory value = Units x Cost per unit

= 100 units x $ 35

= $3,500

Conclusion :

the ending inventory of finished goods under variable costing would be: $3,500