A business operated at 100% of capacity during its first month and incurred the following costs: If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?
A) $62,500
B) $73,500
C) $60,000
D) $52,500

Question

A business operated at 100% of capacity during its first month and incurred the following costs:  If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?
A) $62,500 
B) $73,500 
C) $60,000 
D) $52,500

Quizplus · Accepted Answer

To calculate the cost of goods sold using variable costing, we need to calculate the variable cost per unit first.

Variable cost per unit = (Variable costs incurred / Number of units produced) 
= ($38,400 + $12,000 + $8,400) / 20,000 
= $2.94 per unit

Now we can calculate the cost of goods sold: 
Cost of goods sold = (Number of units produced - Number of units sold) x Variable cost per unit
= (20,000 - 18,500) x $2.94 
= $4,410

The ending inventory using variable costing is calculated as:

Ending inventory = Number of units unsold x Variable cost per unit 
= 1,500 x $2.94 
= $4,410

Therefore, the amount of inventory that would be reported on the variable costing balance sheet is $4,410.

The correct choice is D.

A Business Operated at 100% of Capacity During Its First