Delaware has computed the following unit costs for the year just ended: $$\begin{array} { l l }
\text { Variable manufacturing overhead } & 85 \
\text { Fixed manufacturing overhead } & 20 \
\text { Variable selling and administrative cost } & 18 \
\text { Fixed selling and administrative cost } & 11
\end{array}$$ Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing?
A) Variable, $85; absorption, $105.
B) Variable, $85; absorption, $116.
C) Variable, $103; absorption, $105.
D) Variable, $103; absorption, $116.
E) None of the other answers are correct.

Question

Delaware has computed the following unit costs for the year just ended: $$\begin{array} { l l } 
\text { Variable manufacturing overhead } & 85 \
\text { Fixed manufacturing overhead } & 20 \
\text { Variable selling and administrative cost } & 18 \
\text { Fixed selling and administrative cost } & 11
\end{array}$$ Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing?
A) Variable, $85; absorption, $105.
B) Variable, $85; absorption, $116.
C) Variable, $103; absorption, $105.
D) Variable, $103; absorption, $116.
E) None of the other answers are correct.

Quizplus · Accepted Answer

Variable costing includes only variable manufacturing costs in inventory, while absorption costing includes both variable and fixed manufacturing costs. Therefore, the per-unit cost of inventory under variable costing is $85, and the per-unit cost of inventory under absorption costing is $85 + $20 = $105.

Delaware Has Computed the Following Unit Costs for the Year