McFadden,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | }
\hline \text { Units produced } & { 700 \text { units } } \
\hline \text { Sales price } & \$ 120 \text { per unit } \
\hline \text { Direct materials } & \$ 20 \text { per unit } \
\hline \text { Direct labor } & \$ 12 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,000 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,300 \text { per year } \
\hline
\end{array}$$ What is the ending balance in Finished Goods Inventory using variable costing if 500 units are sold?
A) $6,400
B) $7,400
C) $3,400
D) $4,000

Question

McFadden,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | } 
\hline \text { Units produced } & { 700 \text { units } } \
\hline \text { Sales price } & \$ 120 \text { per unit } \
\hline \text { Direct materials } & \$ 20 \text { per unit } \
\hline \text { Direct labor } & \$ 12 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,000 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,300 \text { per year } \
\hline
\end{array}$$ What is the ending balance in Finished Goods Inventory using variable costing if 500 units are sold?
A) $6,400
B) $7,400
C) $3,400
D) $4,000

Quizplus · Accepted Answer

Under variable costing, only variable costs are included in product costs. The variable costs per unit are direct materials ($20), direct labor ($12), and variable manufacturing overhead ($5), totaling $37 per unit. With 700 units produced and 500 units sold, there are 200 units in ending inventory. The ending balance in Finished Goods Inventory is 200 units * $37 per unit = $7,400. Fixed costs are not included in the product costs under variable costing.

McFadden,Inc What Is the Ending Balance in Finished Goods Inventory Using