Question

Inventory Valuation under Variable Costing

During the most recent year, Judson Company had the following data associated with the product it makes:

Units in beginning inventory 300
Units produced 15,000
Units sold ($300 per unit) 12,700
Variable costs per unit:
Direct materials $20
Direct labor $60
Variable overhead $12
Fixed costs:
Fixed overhead per unit produced $30
Fixed selling and administrative $140,000

Required:

1. How many units are in ending inventory?
$ _______ units
2. Using variable costing, calculate the per-unit product cost.
$_____________
3. What is the value of ending inventory under variable costing?
$___________

Answer 1

1. Ending inventory = Beginning inventory + Production - Sales

= 300 units + 15,000 units - 12,700 units

= 2,600 units

2. Per unit Product Cost Using Variable Costing

$

Direct material 20

Direct labor 60

Variable overhead 12

Product cost 92

3. Value of ending inventory under variable costing

= 2,600 units x $92

= $239,200

Step-by-step explanation:

The units of ending inventory is calculated as beginning inventory plus production minus sales.

Per unit product cost is the aggregate of variable cost per unit. This includes direct material cost, direct labour cost and variable overhead.

Value of ending inventory is the product of units of ending inventory and per unit product cost.