Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
$\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 22.10 \text { per unit } \
\text { Variable marketing costs } & \$ 3.90 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 13.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 19.50 \text { per unit } \
\text { Ending inventories: } & \
\quad \text { Direct materials } & -0- \
\quad \text { WIP } & -0- \
\quad \text { Finished goods } & 250 \text { units }
\end{array}$
-What is cost of goods sold using variable costing?

Question

Zahra's Decoratives produces and sells a decorative pillow for $97.50 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:
 $\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 22.10 \text { per unit } \
\text { Variable marketing costs } & \$ 3.90 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 13.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 19.50 \text { per unit } \
\text { Ending inventories: } & \
\quad \text { Direct materials } & -0- \
\quad \text { WIP } & -0- \
\quad \text { Finished goods } & 250 \text { units }
\end{array}$
-What is cost of goods sold using variable costing?

Quizplus · Accepted Answer

Variable costing includes only variable manufacturing costs in the cost of goods sold. In this case, the variable manufacturing cost is $22.10 per unit. The number of units sold is 1,750. Therefore, the cost of goods sold using variable costing is $22.10 x 1,750 = $38,675.

Zahra's Decoratives Produces and Sells a Decorative Pillow for $97