Answer:
Trio Company
1. Using Variable Costing:
a. Product Cost per unit = $35 (see below)
b. Cost per unit of finished goods = $35 (see below)
2. Using variable cost, the cost of ending finished goods inventory = 6,000 * $35 = $210,000
b. Using total cost, the cost of ending finished goods inventory =
6,000 * $43 = $258,000
Explanation:
a) Calculation of Costs:
Cost per unit Total Costs
Direct materials $15 $300,000
Direct labor $16 $320,000
Variable overhead $4 $80,000
Total Variable $35 $700,000
Fixed Cost $8 $160,000
Total Cost $43 $860,000
b) Cost of Goods sold 14,000 x $43 = $602,000 using total cost per unit.
c) Cost of Goods sold 14,000 x $35 = $490,000 using variable cost per unit.
d) Variable costing is a method of assigning only variable costs to a product while the fixed overheads are treated as period expenses.
