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 1,900 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?

Production costs (17,500 units): ??? Direct materials $183,600 ??? Direct labor 238,500 ??? Variable factory overhead 243,300 ??? Fixed factory overhead 97,700 $763,100 Operating expenses: ??? Variable operating expenses $122,600 ??? Fixed operating expenses 47,300 169,900

Explanation / Answer

Under Variable Costing method only variable cost are considered for calculating the product cost as well as the inventory cost:-

So in the above question product cost will be :-

Direct Material = $183600

Direct Labour = $238500

Variable Factory OH = $243300

Total Cost = $ 665400

Units produced = 17500

So cost / unit = 665400/17500 = $ 38.02

Units left in inventory = 1900

Value of inventory to be taken in Variable Balance sheet = 38.02* 1900 = $ 72238

Answer is therefore option A $72238

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.