Question

A manufacturer reports the following costs to produce 30,000 units in its first year of operations: Direct materials, $30 per unit, Direct labor, $26 per unit, Variable overhead, $300,000, and Fixed overhead, $450,000. Of the 30,000 units produced, 29,200 were sold, and 800 remain in inventory at year-end. Under variable costing, the value of the inventory is:

Answer 1

Answer:

$53,019

Explanation:

Step 1  : Determine the unit product cost

Unit product cost under variable costing consist of only variable manufacturing costs.

Unit product cost = $30 + $26 + ($300,000 ÷ 29,200)

                               = $66.27

Step 2 : Calculate value of the inventory

Value of the inventory = Unit product cost x units in inventory

                                       = $66.27 x 800

                                       = $53,019

Under variable costing, the value of the inventory is $53,019.