A company has the following information for its first month of operations: $\begin{array}{ll}
\hline \text { Raw materials used } & \$ 25,000 \
\text { Sales (\$65 per unit) } & \$ 78,000 \
\text { Directlabor } & \$ 42,000\\text { Variable factory overhead }&\$17,000\
\text { Fixed factory overhead unknown }\\text { Variable sellingand administrative }&\$3,000\
\text { Fixed sellingand administrative }&\$5,000\\text { Gross profit }&\$30,000\
\text { Contributionmargin }&\text { unknown }\
\end{array}$
Ending inventories:
Raw materials $\quad$$ \$ 7,000 $
WIP none
Finishedgoods$\quad$$\quad$$\quad$1,200units The ending inventory under variable costing is:

Question

Quizplus · Accepted Answer

The ending inventory under variable costing includes only variable costs. Calculate the cost per unit: Raw materials used ($25,000) + Direct labor ($42,000) + Variable factory overhead ($17,000) = $84,000 total variable costs. Divide by units sold (78,000 / 65 = 1,200 units) to get $70 per unit. Ending inventory is 1,200 units, so 1,200 units x $70 = $42,000.

A Company Has the Following Information for Its First Month