Toshi Company incurred the following costs in manufacturing desk calculators: $\begin{array}{lr}
\text { Direct materials} &\$14\
\text {Indirect materials (variable) } &4\
\text {Direct labour } &8\
\text {Indirect labour (variable)} &6\
\text { Other variable factory overhead } &10\
\text {Fixed factory overhead} &28\
\text {Variable selling expenses}&20\
\text {Fixed selling expenses}&14
\end{array}$
During the period,the company produced and sold 1,000 units.
What is the inventory cost per unit using variable costing?

Question

Toshi Company incurred the following costs in manufacturing desk calculators: $\begin{array}{lr}
  \text {  Direct materials} &\$14\
 \text {Indirect materials (variable)  } &4\
 \text {Direct labour } &8\
 \text {Indirect labour (variable)} &6\
 \text { Other variable factory overhead } &10\
 \text {Fixed factory overhead} &28\
 \text {Variable selling expenses}&20\
 \text {Fixed selling expenses}&14 
\end{array}$
 During the period,the company produced and sold 1,000 units.
What is the inventory cost per unit using variable costing?

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in the inventory cost per unit. The total variable manufacturing cost is $35,000 ($10,000 + $5,000 + $15,000 + $5,000). Dividing this by the number of units produced (1,000) gives a variable manufacturing cost of $35 per unit. Adding the variable selling and administrative expenses of $7 per unit gives a total inventory cost per unit of $42. Therefore, the correct answer is A).

Toshi Company Incurred the Following Costs in Manufacturing Desk Calculators