Answer the following questions using the information below:
Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes:

-What is the inventoriable cost per unit using variable costing?
A)$32
B)$35
C)$40
D)$60

Question

Answer the following questions using the information below:
Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes:
 
-What is the inventoriable cost per unit using variable costing?
A)$32 
B)$35 
C)$40 
D)$60

Quizplus · Accepted Answer

To calculate the inventoriable cost per unit using variable costing, we need to consider only the variable manufacturing costs. The variable manufacturing costs per unit can be calculated as follows:
Variable Manufacturing Cost per Unit = Variable Cost per Unit x Number of Units Produced

Variable cost per unit = ($20 + $10 + $5) = $35
Number of Units Produced = 50,000

Therefore, Variable Manufacturing Cost per Unit = $35 x 50,000 / 50,000 = $35

Thus, the inventoriable cost per unit using variable costing is $35.

Since Gloria's Decorating uses variable costing, the best choice is:
Option B: Keep the current production level because variable costing only considers variable costs, meaning fixed costs are not included in the cost calculation. Therefore, the decision to change the production level should not be based on the variable costing approach.

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