McFarlane, Inc. reports the following information: $$\begin{array} { | l | r | l | }
\hline \text { Units produced } & 600 & \text { units } \
\hline \text { Units sold } & 410 & \text { units } \
\hline \text { Sales price } & \$ 130 & \text { per unit } \
\hline \text { Direct materials } & \$ 25 & \text { per unit } \
\hline \text { Direct labor } & \$ 9 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 16 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 18,300 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 5 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,900 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories. What is the ending balance in Finished Goods Inventory using variable costing?
A) $9500
B) $6460
C) $10,450
D) $15,295

Question

McFarlane, Inc. reports the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Units produced } & 600 & \text { units } \
\hline \text { Units sold } & 410 & \text { units } \
\hline \text { Sales price } & \$ 130 & \text { per unit } \
\hline \text { Direct materials } & \$ 25 & \text { per unit } \
\hline \text { Direct labor } & \$ 9 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 16 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 18,300 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 5 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,900 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories. What is the ending balance in Finished Goods Inventory using variable costing?
A) $9500
B) $6460
C) $10,450
D) $15,295

Quizplus · Accepted Answer

Variable costing only considers variable manufacturing costs in the cost of goods sold and ending inventory. In this case, the variable manufacturing costs are direct materials, direct labor, and variable manufacturing overhead.Units produced = 600 unitsUnits sold = 410 unitsEnding inventory = 600 units - 410 units = 190 unitsCost of goods sold = (Units sold * Variable manufacturing cost per unit)= 410 units * ($25 + $9 + $16)= $21,060Ending inventory = (Ending inventory * Variable manufacturing cost per unit)= 190 units * ($25 + $9 + $16)= $9,500Therefore, the ending balance in Finished Goods Inventory using variable costing is $9,500.

McFarlane, Inc There Are No Beginning Inventories