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A company produces a single product. Variable production costs are $12.50 per unit and variable selling and administrative expenses are $3.50 per unit. Fixed manufacturing overhead totals $41,000 and fixed selling and administration expenses total $45,000. Assuming a beginning inventory of zero, production of 4,500 units and sales of 3,850 units, the dollar value of the ending inventory under variable costing would be: Multiple Choice $10,400 $5,850 $8,125 $13,975

2 Answers

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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.

User PhilMY
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1 vote

Answer:

the third option is correct - $8,125

Step-by-step explanation:

The calculation of the ending inventory under variable costing is given below:

Ending inventory value (Variable costing) os

= Variable production cost per unit × No. of units

= $12.50 × (4,500 - 3,850)

= $8,125,

Hence, the ending inventory under variable costing is $8,125

Therefore the third option is correct

User Dimitry
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4.5k points