Roberta's Hot Stuff began making hot and sour soup in August, 2012. The soup sells for $2 for a large package. Variable production costs are $0.70 per package. Roberta's Hot Stuff incurs monthly fixed manufacturing overhead costs of $40,000 and fixed selling and administrative cost of $8,000. On August 31, 2012 ending inventory was 10,000 soup packages. Assume Roberta's Hot Stuff produced 400,000 soup packages in September. Roberta's Hot Stuff sold 406,000 of the soup packages in September.
-Calculate the September ending inventory value using variable costing.

Question

Quizplus · Accepted Answer

Under variable costing, only variable production costs are included in inventory valuation. The variable cost per package is $0.70. September ending inventory = Beginning inventory + Production - Sales = 10,000 + 400,000 - 406,000 = 4,000 packages. The value of ending inventory = 4,000 packages * $0.70/package = $2,800.

Roberta's Hot Stuff Began Making Hot and Sour Soup in August