Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for 2014: $\begin{array}{ll}
\text { Selling price }& \$ 15.00 \text { per } t \text {-shirt } \
\text { Variable costs: }\
\text { Production (manufacturing costs) } & \$ 3.00 \text { per } t \text {-shirt } \
\text { Selling \& administration } & \$ 1.00 \text { per } t \text {-shirt }\
\text { Fixed costs: }\
\text { Production (manufacturing costs) } & \$ 1,000,000 \text { per year } \
\text { Selling \& administration } & \$ 2,000,000 \text { per year }
\end{array}$ During 2014, the company produced 400,000 t-shirts and sold 350,000 of them. Assume that there was no beginning inventory. How much is the inventory under variable costing at December 31, 2014?

Question

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in inventory. Therefore, the inventory at December 31, 2014 is:50,000 units x $3.00 per unit = $150,000

Aerotrino Produces and Sells Popular T-Shirts During 2014, the Company Produced 400,000 T-Shirts and Sold 350,000