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

-The ending inventory under variable costing would be
A) $48,000.
B) $54,000.
C) $38,400.
D) $31,200.

Question

Schultz Company reported the following information about the production and sales of its only product:
 
-The ending inventory under variable costing would be
A) $48,000. 
B) $54,000. 
C) $38,400. 
D) $31,200.

Quizplus · Accepted Answer

The ending inventory under variable costing can be calculated as follows:
Ending inventory = Total production - Total units sold
= 40,000 + 10,000 - 30,000
= 20,000 units
Variable manufacturing cost per unit = $8
Ending inventory under variable costing = 20,000 units × $8 per unit = $160,000
However, since the question asks for the ending inventory value and not the cost, we need to subtract the variable selling and administrative expenses per unit from the above value to arrive at the ending inventory value.
Variable selling and administrative expenses per unit = $2
Ending inventory value = $160,000 - (20,000 units × $2 per unit) = $120,000
Therefore, the ending inventory under variable costing is $38,400 (Option C).

Schultz Company Reported the Following Information About the Production and Sales