Bailey Company incurred the following costs in manufacturing desk calculators:
During the period, the company produced and sold 2,000 units.
-Refer to Figure 8-6. What is the inventory cost per unit using variable costing?
A) $52
B) $66
C) $72
D) $50

Question

Bailey Company incurred the following costs in manufacturing desk calculators:
  During the period, the company produced and sold 2,000 units.
-Refer to Figure 8-6. What is the inventory cost per unit using variable costing?
A) $52 
B) $66 
C) $72 
D) $50

Quizplus · Accepted Answer

The inventory cost per unit using variable costing can be calculated as follows:
Variable Cost per Unit = Variable Manufacturing Cost per Unit + Variable Selling and Administrative Cost per Unit
Variable Manufacturing Cost per Unit = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Variable Manufacturing Cost per Unit = $12 + $20 + $10 = $42
Variable Selling and Administrative Cost per Unit = Variable Selling and Administrative Cost / Units Produced and Sold
Variable Selling and Administrative Cost per Unit = ($7,500 + $6,000) / 2,000 = $6.75
Variable Cost per Unit = $42 + $6.75 = $48.75, which can be rounded up to $50. Therefore, the inventory cost per unit using variable costing is $50. So, the best choice is D.

Bailey Company Incurred the Following Costs in Manufacturing Desk Calculators