Loring Company had the following data for the month:
Fixed overhead is $4,000 per month; it is applied to production based on normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14. Selling and administrative expense for the month, all fixed, totaled $3,600.
-Refer to Figure 8-2. What is the unit product cost under variable costing?
A) $8.60
B) $10.60
C) $8.20
D) $10.20
E) $7.20

Question

Loring Company had the following data for the month:
  Fixed overhead is $4,000 per month; it is applied to production based on normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14. Selling and administrative expense for the month, all fixed, totaled $3,600.
-Refer to Figure 8-2. What is the unit product cost under variable costing?
A) $8.60 
B) $10.60 
C) $8.20 
D) $10.20 
E) $7.20

Quizplus · Accepted Answer

Under variable costing, only the variable costs are included in the product cost. This typically includes direct materials, direct labor, and variable manufacturing overhead. Fixed manufacturing overhead is not included in the product cost under variable costing.

Loring Company Had the Following Data for the Month