McCann Mechanics, compiled the following information for the current year: $\begin{array} { | l | r | }
\hline \text { Variable manufacturing cost } & \$ 35 \
\hline \text { Fixed manufacturing cost } & 30 \
\hline \text { Variable selling and administrative } & 40 \
\text { cost } & \
\hline \text { Fixed selling and administrative cost } & 16 \
\hline
\end{array}$ Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing?
A)Variable, $35; absorption, $65.
B)Variable, $35; absorption, $81.
C)Variable, $105; absorption, $105.
D)Variable, $105; absorption, $81.
E)Variable $35; absorption $105.

Question

McCann Mechanics, compiled the following information for the current year: $\begin{array} { | l | r | } 
\hline \text { Variable manufacturing cost } & \$ 35 \
\hline \text { Fixed manufacturing cost } & 30 \
\hline \text { Variable selling and administrative } & 40 \
\text { cost } & \
\hline \text { Fixed selling and administrative cost } & 16 \
\hline
\end{array}$ Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing?
A)Variable, $35; absorption, $65.
B)Variable, $35; absorption, $81.
C)Variable, $105; absorption, $105.
D)Variable, $105; absorption, $81.
E)Variable $35; absorption $105.

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in the per-unit cost of inventory. Therefore, the per-unit cost would be $35. 
Under absorption costing, both variable and fixed manufacturing costs are included in the per-unit cost of inventory. Therefore, the per-unit cost would be $35 (variable manufacturing costs) + $30 (fixed manufacturing costs) = $65.

McCann Mechanics, Compiled the Following Information for the Current Year