Question

Sanders Company has the following information for last year: Selling price $190 per unit Variable production costs $52 per unit produced Variable selling and admin. expenses $18 per unit sold Fixed production costs $240,000 Fixed selling and admin. expenses $180,000 Units produced 12,000 Units sold 7,000 There were no beginning inventories. What is the cost of ending inventory for Sanders using the variable costing method? a.$300,000 b.$280,000 c.$260,000

Answer 1

Option (c) is correct.

Step-by-step explanation:

Given that,

Variable production costs = $52 per unit

selling and admin. expenses = $18 per unit sold

Fixed production costs = $240,000

Fixed selling and admin. expenses = $180,000

Units produced = 12,000

Units sold = 7,000

Therefore,

Cost of ending inventory:

= (Units produced - Units sold) × Variable production costs per unit

= (12,000 - 7,000) × $52

= 5,000 × $52

= $260,000