Ohio Company reported the following information about the production and sales of its only product during its first month of operations: $\begin{array}{lr}
\text { Sales } \$ 225 \text { per unit) } & \$ 360,000 \
\text { Direct materi als used } & \$ 176,000 \
\text { Direct labor } & \$ 100,000 \
\text { Variable factory overhead } & \$ 44,000 \
\text { Fixed factory overhead } & \$ 80,000 \
\text { Variable selling and administrative expenses } & \$ 20,000 \
\text { Fixed selling and administrative expenses } & \$ 10,000\\
\text { Ending inventories: }\\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 400 \text { units }
\end{array}$ The ending inventory under variable costing is_____.

Question

Quizplus · Accepted Answer

Variable costing includes only variable production costs in the cost of inventory. These costs are direct materials, direct labor, and variable factory overhead. To find the ending inventory under variable costing, calculate the variable cost per unit and multiply by the number of units in ending inventory. Variable costs are: Direct materials = $176,000 Direct labor = $100,000 Variable factory overhead = $44,000 Total variable costs = $320,000 Number of units produced = Total sales / Sales price per unit = $360,000 / $225 = 1,600 units Variable cost per unit = Total variable costs / Number of units produced = $320,000 / 1,600 = $200 per unit Ending inventory (400 units) under variable costing = 400 units * $200 per unit = $80,000.

Ohio Company Reported the Following Information About the Production and Sales