Question

A company produces a single product. Variable production costs are $12.90 per unit and variable selling and administrative expenses are $3.90 per unit. Fixed manufacturing overhead totals $45,000 and fixed selling and administration expenses total $49,000. Assuming a beginning inventory of zero, production of 4,900 units and sales of 4,050 units, the dollar value of the ending inventory under variable costing would be:

Answer 1

$10,965

Step-by-step explanation:

Computation for the dollar value of the ending inventory under variable costing

First step is to find the Units in ending inventory

Using this formula

Units in ending inventory = Units in beginning inventory + Units produced−Units sold

Let plug in the formula

Units in ending inventory= 0 units + 4,900 units−4,050 units

Units in ending inventory = 850 units

Last step is to find the Value of ending inventory under variable costing

Using this formula

Value of ending inventory under variable costing = Unit in ending inventory × Variable production cost

Let plug in the formula

Value of ending inventory under variable costing= 850 units × $12.90 per unit

Value of ending inventory under variable costing = $10,965

Therefore the dollar value of the ending inventory under variable costing would be $10,965