During its first year of operations,the McCormick Company incurred the following manufacturing costs: Direct materials,$5 per unit,Direct labor,$3 per unit,Variable overhead,$4 per unit,and Fixed overhead,$250,000.The company produced 25,000 units,and sold 20,000 units,leaving 5,000 units in inventory at year-end.What is the value of ending inventory under variable costing?
A)$60,000
B)$110,000
C)$50,000
D)$250,000
E)$310,000

Question

Quizplus · Accepted Answer

Under variable costing, only variable costs are included in inventory valuation. The variable costs per unit are direct materials ($5), direct labor ($3), and variable overhead ($4), totaling $12 per unit. The ending inventory consists of 5,000 units, so the value of ending inventory under variable costing is 5,000 units * $12/unit = $60,000.

During Its First Year of Operations,the McCormick Company Incurred the Following