Question

Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $22.10 per unit Variable marketing costs $ 3.90 per unit Fixed manufacturing costs $13.00 per unit Administrative expenses, all fixed $19.50 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 250 units What is cost of goods sold using variable costing?

Answer 1

$38,675

Step-by-step explanation:

sales price per pillow $97.50

total production 2,000 units

total sales 1,750 units

costs:

variable costs $22.10 per unit

fixed manufacturing $13.00 per unit

fixed administrative expenses $19.50 per unit

variable costing assigns only variable costs to inventory and COGS, so the COGS using variable costing = 1,750 units x $22.10 = $38,675

under variable costing, all fixed costs are period costs (fixed manufacturing and fixed administrative).