Question

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under variable costing, the value of the inventory is

Answer 1

$18,400

Step-by-step explanation:

Given that

Direct material = $10

Direct labor = $6

Variable overhead

= ($70,000 ÷ 10000 units)

= $7

Total cost per unit of Finished Goods

= $23

So, the value of ending inventory under variable costing

= $23 × 800 units

= $18,400

Therefore we include Direct material per unit, Direct labor per unit and variable overhead per unit under variable costing.