Octagonal Company has the following information for 2018: $\begin{array}{lr}
\text { Selling price } & \$ 150 \text { per unit } \
\text { Variable production costs } & \$ 40 \text { per unit produced } \
\text { Variable selling and admin. expenses } & \$ 16 \text { per unit sold } \
\text { Fixed production costs } & \$ 200,000 \
\text { Fixed selling and admin. expenses } & \$ 140,000 \
\text { Units produced } & 10,000 \text { units } \
\text { Units sold } & 8,000 \text { units }
\end{array}$ There were no beginning inventories. What is the cost of ending inventory for Octagonal using the variable costing method?
A)$80,000
B)$180,000
C)$120,000
D)$300,000

Question

Quizplus · Accepted Answer

Under the variable costing method, only variable production costs are included in the cost of inventory. The variable production cost per unit is $40, and 2,000 units (10,000 produced - 8,000 sold) are in ending inventory. Thus, the cost of ending inventory is 2,000 units * $40/unit = $80,000.

Octagonal Company Has the Following Information for 2018 There Were No Beginning Inventories