Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): $$\begin{array} { l r }
\text { Selling price } & \$ 9.00 \text { per mug } \
\text { Variable production cost } & \$ 2.50 \text { per mug } \
\text { Variable selling cost } & \$ 1.10 \text { per mug } \
\text { Fixed production cost } & \$ 100,000 \text { per month } \
\text { Fixed selling and administrative cost } & \$ 60,000 \text { per month }
\end{array}$$ Production and sales in units for the first three months of 2014 are as follows: $\begin{array}{lll}\text { Year }&\text {Production }&\text {Sales }\
\text { January } & 50,000 & 44,000 \
\text { February } & 40,000 & 45,000 \
\text { March } & 50,000 & 45,000
\end{array}$
Inventory at January 1, 2014 consisted of 1,000 mugs. During which months will ending inventory be the same if variable costing is used?

Question

Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Selling price } & \$ 9.00 \text { per mug } \
\text { Variable production cost } & \$ 2.50 \text { per mug } \
\text { Variable selling cost } & \$ 1.10 \text { per mug } \
\text { Fixed production cost } & \$ 100,000 \text { per month } \
\text { Fixed selling and administrative cost } & \$ 60,000 \text { per month }
\end{array}$$ Production and sales in units for the first three months of 2014 are as follows: $\begin{array}{lll}\text { Year }&\text {Production }&\text {Sales }\
\text { January } & 50,000 & 44,000 \
\text { February } & 40,000 & 45,000 \
\text { March } & 50,000 & 45,000
\end{array}$
Inventory at January 1, 2014 consisted of 1,000 mugs. During which months will ending inventory be the same if variable costing is used?

Quizplus · Accepted Answer

Under variable costing, ending inventory is calculated based on production minus sales. For both January and March, the production exceeds sales by 6,000 units (50,000 produced - 44,000 sold in January and 50,000 produced - 45,000 sold in March), resulting in the same increase in ending inventory for both months.

Brislin Gifts Makes Ceramic Mugs and Has the Following Amounts