McFarlane,Inc.reports the following information: $$\begin{array} { | l | r | c | }
\hline \text { Units produced } & 590 & \text { units } \
\hline \text { Units sold } & 490 & \text { units } \
\hline \text { Sales price } & \$ 120 & \text { per unit } \
\hline \text { Direct materials } & \$ 26 & \text { per unit } \
\hline \text { Direct labor } & \$ 9 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 14 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,500 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,200 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories.What is the ending balance in Finished Goods Inventory using variable costing?

Question

McFarlane,Inc.reports the following information: $$\begin{array} { | l | r | c | } 
\hline \text { Units produced } & 590 & \text { units } \
\hline \text { Units sold } & 490 & \text { units } \
\hline \text { Sales price } & \$ 120 & \text { per unit } \
\hline \text { Direct materials } & \$ 26 & \text { per unit } \
\hline \text { Direct labor } & \$ 9 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 14 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,500 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,200 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories.What is the ending balance in Finished Goods Inventory using variable costing?

Quizplus · Accepted Answer

Variable costing only considers variable manufacturing costs in the valuation of inventory. In this case, the variable manufacturing costs are direct materials, direct labor, and variable manufacturing overhead. The total variable manufacturing cost per unit is $26 + $9 + $14 = $49. The ending balance in Finished Goods Inventory is 490 units * $49 = $24,010.

McFarlane,Inc There Are No Beginning Inventories