Question

a company produces a single product. variable production costs are $14.00 per unit and variable selling and administrative expenses are $5.00 per unit. fixed manufacturing overhead totals $56,000 and fixed selling and administration expenses total $60,000. assuming a beginning inventory of zero, production of 6,000 units and sales of 4,600 units, the dollar value of the ending inventory under variable costing would be:

Answer 1

The value of the ending inventory under variable costing is calculated to be $19,600.

To determine the value of the ending inventory under variable costing we first find out the units in the ending inventory as follows;

Units in ending inventory = Units in beginning inventory + Produced units − Sold units

Units in ending inventory = 0 + 6000 - 4600

Units in ending inventory = 1400

Now the value of the ending inventory under variable costing can be determined by multiplying units in the ending inventory by the variable  production cost as follows;

Value of Ending inventory = Unit in ending inventory × Variable production cost

Value of Ending inventory = 1400 × 14

Value of Ending inventory = $19,600

Hence, the value of the ending inventory would be $19,600 under variable costing.

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