A company produces a single product. Variable production costs are $12 per unit and variable selling and administrative expenses are $3 per unit. Fixed manufacturing overhead totals $36,000 and fixed selling and administration expenses total $40,000. Assuming a beginning inventory of zero, production of 4,000 units and sales of 3,600 units, the dollar value of the ending inventory under variable costing would be:
A)$4,800
B)$8,400
C)$6,000
D)$3,600

Question

Quizplus · Accepted Answer

Variable production costs are $12 per unit and variable selling and administrative expenses are $3 per unit. So, the total variable cost per unit is $15 ($12 + $3). The ending inventory is 400 units (4,000 units produced - 3,600 units sold). So, the dollar value of the ending inventory under variable costing is $4,800 (400 units x $15 per unit).

A Company Produces a Single Product