Question

Peterson Company's records for the year ended December 31 show that no finished goods inventory existed at January 1 and no work was in process at the beginning or end of the year. Net sales $1,400,000 Manufacturing costs Fixed 315,000 Variable 630,000 Operating expenses Fixed 140,000 Variable 98,000 Units manufactured 70,000 Units sold 60,000 What is Peterson's finished goods inventory cost at December 31 under the variable costing method?

Answer 1

Answer:

Peterson's finished goods inventory cost at December 31 under the variable costing method is $90,000

Explanation:

The computation of the Peterson's finished goods inventory cost is shown below:

= (Variable manufacturing cost ÷ units manufactured) ×  units difference

= ($630,000 ÷ 70,000 units) × 10,000 units

= $90,000

The units difference would be equal to

= Units manufactured - units sold

= 70,000 - 60,000

= 10,000 units