Question

A company produces a single product. Variable production costs are $13.10 per unit and variable selling and administrative expenses are $4.10 per unit. Fixed manufacturing overhead totals $47,000 and fixed selling and administration expenses total $51,000. Assuming a beginning inventory of zero, production of 5,100 units and sales of 4,150 units, the dollar value of the ending inventory under variable costing would be_____________________.

Answer 1

Answer:

Value of the ending inventory is $ 16,340

Explanation:

The variable costing method is also known as the marginal costing method, under this method production units and inventories are valued using the variable cost per unit.

Variable cost per unit = D. Material cost+ Direct labour cost + Variable Overhead

To value the closing inventory of the company, we follow the steps below:

Step 1

Calculate the variable cost per unit

= $13.10 + $4.10 = $17.2

Step 2

Calculate the closing inventory

Closing inventory = Opening Inventory + purchases - Sales

= 0 + 5,100 -4,150 = 950 units

Step 3

Value the closing inventory

= VC/unit × units

=   $17.2 × 950

= $ 16,340

Value of the ending inventory is $ 16,340