Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): $$\begin{array} { l r }
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much will be reported for inventory on the balance sheet if variable costing is used?

Question

Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much will be reported for inventory on the balance sheet if variable costing is used?

Quizplus · Accepted Answer

Under variable costing, inventory is valued at variable production cost per unit. Ending inventory = Beginning inventory + Production - Sales = 1,500 + 6,200 - 5,800 = 1,900 units. Inventory value = 1,900 units * $46 = $87,400.

Affinity Makes a Single Product, Pool Pumps How Much Will Be Reported for Inventory on the Balance