Magic Screen\'s contribution income statement utilizing variable costing appears

Question

Magic Screen's contribution income statement utilizing variable costing appears below:

Magic Screen Company
Income Statement
For the Year Ended December 31, 2007

Sales ($30/unit) $1,200,000
Less variable costs:
COGS 800,000
Selling & Admin 40,000 840,000
Contribution Margin 360,000
Fixed overhead 98,000
Fixed Selling & Admin 170,000 268,000
Net Income $ 92,000

Magic Screen Company produced 49,000 units during the year. Variable and fixed production costs have remained constant the entire year. There were no beginning inventories.

The dollar value of the ending inventory using full costing will be:
Answer


$180,000

$198,000

$189,000

$18,000

Explanation / Answer

       $198,000

Variable manufacturing cost = 49,000 X $20 = $980,000
Add : Fixed overhead                                          $98,000
Total manufacturing cost                               $1,078,000

Total manufacturing cost per unit = $1,078,000 / 49,000
                                                       = $22

Inventory valuation (Full Costing method) = $22 x 9,000 units
                                                                 = $198,000

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