A business operated at 100% of capacity during its first month and incurred the

Question

A business operated at 100% of capacity during its first month and incurred the following costs:

If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$72,196

b.$60,192

c.$84,604

d.$68,418

Production costs (18,000 units): ??? Direct materials $183,500 ??? Direct labor 228,600 ??? Variable factory overhead 265,200 ??? Fixed factory overhead 92,400 $769,700 Operating expenses: ??? Variable operating expenses $134,900 ??? Fixed operating expenses 47,200 182,100

Explanation / Answer

Total variable production cost = 183500+228600+265200 = 677300

Variable production cost per unit = 677300/18000 = 37.63 per unit

ENding inventory value under variable costing = 1600*37.62 = 60192

so answer is b) $60192

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