Answer the following question(s)using the information below.Gabe's Auto produces and sells an auto part for $30.00 per unit.In 2012, 100,000 parts were produced and 75,000 units were sold.Other information for the year includes:

-What is the inventoriable cost per unit using variable costing?
A)$14.25
B)$15.00
C)$18.75
D)$20.10
E)$20.00

Question

Answer the following question(s)using the information below.Gabe's Auto produces and sells an auto part for $30.00 per unit.In 2012, 100,000 parts were produced and 75,000 units were sold.Other information for the year includes:
 
-What is the inventoriable cost per unit using variable costing?
A)$14.25 
B)$15.00 
C)$18.75 
D)$20.10 
E)$20.00

Quizplus · Accepted Answer

Variable costing only considers the direct costs of production, which are the cost of materials, labor, and variable overhead. The inventoriable cost per unit using variable costing can be calculated as follows:
Inventoriable cost per unit = Direct materials + Direct labor + Variable overhead
Direct materials = $6.00 per unit (given)
Direct labor = $3.00 per unit (given)
Variable overhead = $6.75 per unit (total variable overhead cost divided by number of units sold)
Variable overhead per unit = $75,000 / 75,000 = $1.00
Inventoriable cost per unit = $6.00 + $3.00 + $1.00 = $10.00
However, this only considers the variable costs and does not include the fixed costs, such as rent and salaries, which must still be paid even if no units are produced. Therefore, the total cost per unit would be higher if fixed costs were taken into account. Of the given choices, B is the closest to the inventoriable cost per unit using variable costing.

Answer the Following Question(s)using the Information Below