Final answer:
To calculate the dollar value of the ending inventory under variable costing, we need to consider both the variable costs and fixed costs. The total variable costs are calculated by summing the variable production costs and variable selling and administrative expenses. The total fixed costs are calculated by summing the fixed manufacturing overhead and fixed selling and administrative expenses. By subtracting the sales from the production and adding the total variable costs and total fixed costs, we can determine the dollar value of the ending inventory.
Step-by-step explanation:
In order to calculate the dollar value of the ending inventory under variable costing, we need to consider both the variable costs and the fixed costs. Variable production costs are $12.50 per unit and variable selling and administrative expenses are $3.50 per unit. The fixed manufacturing overhead is $41,000 and the fixed selling and administration expenses are $45,000.
First, let's calculate the total variable costs:
Total Variable Costs = Variable Production Costs + Variable Selling and Administrative Expenses
Total Variable Costs = ($12.50 * 4,500 units) + ($3.50 * 4,500 units)
Total Variable Costs = $56,250 + $15,750
= $72,000
Next, let's calculate the fixed costs:
Total Fixed Costs = Fixed Manufacturing Overhead + Fixed Selling and Administrative Expenses
Total Fixed Costs = $41,000 + $45,000
= $86,000
Now, let's calculate the ending inventory:
Ending Inventory = Total Variable Costs + Total Fixed Costs - (Sales - Production)
Ending Inventory = $72,000 + $86,000 - (3,850 units - 4,500 units)
Ending Inventory = $158,000 - (3,850 units - 4,500 units)
= $158,000 - 650 units
Ending Inventory = $158,000 - $8,125
= $149,875
Therefore, the dollar value of the ending inventory under variable costing is $149,875.