A company has the following information for its first month of operations: $\begin{array}{lr}
\text { Raw materials used } & \$ 25,000 \
\text { Sales ( } \$ 65 \text { per unit) } & \$ 78,000 \
\text { Direct labor } & \$ 42,000 \
\text { Variable factory overhead } & \$ 17,000 \
\text { Fixed factory overhead } & \text { unknown }\\text { Variable selling and }\
\text { administrative } & \$ 3,000 \
\text { Fixed selling and administrative } & \$ 5,000 \
\text { Gross profit } & \$ 30,000 \
\text { Contribution margin } & \text { unknown }\\text { Ending inventories: }\
\text { Raw materials } & \$ 7,000 \
\text { WIP } & \text { none } \
\text { Finished goods } & 1,200 \text { units }
\end{array}$ is the inventory cost per unit using variable costing.

Question

Quizplus · Accepted Answer

Under variable costing, the inventory cost per unit includes only variable costs. The variable costs per unit are calculated as follows: Raw materials used ($25,000) + Direct labor ($42,000) + Variable factory overhead ($17,000) divided by the number of units sold (1,200 units + units sold to achieve $78,000 sales at $65 per unit). This results in a cost of $35.00 per unit.

A Company Has the Following Information for Its First Month