Question

​Iagan, Inc. has collected the following data.​ (There are no beginning​ inventories.) Units produced 500500 units Sales price $ 130$130 per unit Direct materials $ 30$30 per unit Direct labor $ 13$13 per unit Variable manufacturing overhead $ 5$5 per unit Fixed manufacturing overhead $ 15 comma 200$15,200 per year Variable selling and administrative costs $ 5$5 per unit Fixed selling and administrative costs $ 16 comma 700$16,700 per year What is the ending balance in Finished Goods Inventory using variable costing if 400400 units are​ sold?

Answer 1

Answer:

Units  produced = 500 units

Units sold = 400  units

Closing inventory of finished goods

= Units produced - Units sold

= 500 units - 400 units

= 100 units

Value of closing inventory of finished goods

= 100 units x $48

= $4,800

The ending balance in finished goods inventory is $4,800

Variable production cost per unit  $

Direct material                                30

Direct labour                                    13

Variable manufacturing overhead 5

                                                         48

Explanation:

In this case, there is need to determine the quantity of closing inventory of finished goods by deducting quantity sold from quantity produced. This quantity will be valued at variable production cost of $48 per unit using variable costing.  The variable production cost per unit is the total of direct material cost per unit, direct labour cost per unit and variable manufacturing overhead.per unit.