Eastwood Company has the following information for the current year:
$\begin{array}{llcc}
\text { Selling price } & \text { \$ 150 per unit } \
\text { Variable production costs} & \text { \$ 40 per unit producer } \
\text { Variable selling and admin. expenses} & \text { \$ 16 per unit sold } \
\text { Fixed production costs } & \text { \$ 200,000 } \
\text { Fixed selling and admin. expenses } & \text {\$ 140,000 } \
\text { Units produced} & \text { 10,000 units} \
\text {Units sold } & \text { 8.000 units } \
\end{array}$
There were no beginning inventories.
-Refer to the figure.What is the cost of ending inventory for Eastwood using the variable costing method?

Question

Eastwood Company has the following information for the current year:
$\begin{array}{llcc}
  \text { Selling price } &  \text { \$ 150 per unit } \
  \text {  Variable production costs} &  \text {  \$ 40 per unit producer } \ 
  \text {  Variable selling and admin. expenses} &  \text { \$ 16 per unit sold } \
  \text { Fixed production costs } &  \text {  \$ 200,000  } \
  \text { Fixed selling and admin. expenses } &  \text {\$ 140,000  } \ 
 \text {  Units produced} &  \text {  10,000 units} \
  \text {Units sold  } &  \text { 8.000 units } \
\end{array}$
  There were no beginning inventories.
-Refer to the figure.What is the cost of ending inventory for Eastwood using the variable costing method?

Quizplus · Accepted Answer

Variable costing method only considers variable costs in the inventory valuation. In this case, the variable production costs are $40 per unit. The ending inventory is 2,000 units (10,000 units produced - 8,000 units sold). Therefore, the cost of ending inventory using the variable costing method is 2,000 units x $40 per unit = $80,000.

Eastwood Company Has the Following Information for the Current Year