Aerotrino produces and sells popular t-shirts.Following is information about its t-shirts for 2017: $\begin{array}{lr}
\text { Selling price } & \$ 15.00 \text { per t-shirt } \
\text { Variable costs: } & \
\text { Production (manufacturing costs) } & \$ 3.00 \text { per t-shirt }\\text { Selling } \& \text { administration } & \$ 1.00 \text { per t-shirt } \
\text { Fixed costs: } & \
\text { Production (manufacturing costs) } & \$ 1,000,000 \text { per year } \
\text { Selling \& administration } & \$ 2,000,000 \text { per vear }
\end{array}$ During 2017, 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, 2017?

Question

Aerotrino produces and sells popular t-shirts.Following is information about its t-shirts for 2017: $\begin{array}{lr}
\text { Selling price } & \$ 15.00 \text { per t-shirt } \
\text { Variable costs: } & \
 \text { Production (manufacturing costs) } & \$ 3.00 \text { per t-shirt }\\text { Selling } \& \text { administration } & \$ 1.00 \text { per t-shirt } \
\text { Fixed costs: } & \
\text { Production (manufacturing costs) } & \$ 1,000,000 \text { per year } \
\text { Selling \& administration } & \$ 2,000,000 \text { per vear }
\end{array}$ During 2017, 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, 2017?

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in inventory. Therefore, the inventory at December 31, 2017, is:50,000 units x $3.00 per unit = $150,000

Aerotrino Produces and Sells Popular T-Shirts During 2017, the Company Produced 400,000 T-Shirts and Sold 350,000