Question

Sprinkle Co. sells its product for $60 per unit. During 2016, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses. Ending inventory under variable costing is A. $1,350,000. B. $270,000. C. $600,000. D. $390,000.

Answer 1

Answer:

Ending inventory = $270,000

Explanation:

Given:

Total produced = 60,000 unit

Sold unit = 50,000 unit

Direct materials = $15 per unit

Direct labor = $9 per unit

Variable overhead = $3 per unit

Computation:

Variable Cost per unit = Direct materials + Direct labor + Variable overhead

Variable Cost per unit = $15 + $9 + $3

Variable Cost per unit = $27

Computation ending inventory under variable costing:

Ending inventory = (Unsold Units)Variable Cost per unit

Ending inventory = (60,000 - 50,000)$27

Ending inventory = $270,000