DeJager Company reported the following information about the production and sales of its only product:

-The ending inventory under variable costing would be
A) $24,000.
B) $27,000.
C) $19,200.
D) $15,600.

Question

DeJager Company reported the following information about the production and sales of its only product:
 
-The ending inventory under variable costing would be
A) $24,000. 
B) $27,000. 
C) $19,200. 
D) $15,600.

Quizplus · Accepted Answer

Under variable costing, ending inventory is calculated using only variable production costs. Based on the information provided, variable production cost per unit is $8 ($200,000 ÷ 25,000 units). The ending inventory would be calculated as follows: 
4,800 (units) x $8 (variable cost per unit) = $38,400. 
However, the company also had fixed production costs of $100,000 ($60,000 + $40,000) that are not included in the ending inventory calculation. Therefore, the ending inventory would be reduced by $20,800 ($38,400 - $17,600) to reflect the fixed costs that are expensed in the period of production. 
The correct answer is therefore C, $19,200.

DeJager Company Reported the Following Information About the Production and Sales