The accounting records for Moss Manufacturing Company included the following cost information relating to its first year of operations: $\begin{array}{lrr}
\text { Direct materials} &\$60,000\
\text { Direct labor } &\$80,000\
\text { Fixed manufacturing overhead} &\$100,000\
\text {Variable manufacturing overhead } &\$20,000\
\end{array}$

Assume the company produced 10,000 units of inventory and sold 6,000 of these units for $196,000.What amount of finished goods will be reported on the balance sheet at the end of the year under variable costing?
A) $100,000
B) $96,000
C) $64,000
D) None of these answers are correct.

Question

The accounting records for Moss Manufacturing Company included the following cost information relating to its first year of operations: $\begin{array}{lrr}
  \text {  Direct materials} &\$60,000\
 \text { Direct labor } &\$80,000\
 \text {  Fixed manufacturing overhead} &\$100,000\
 \text {Variable manufacturing overhead  } &\$20,000\
\end{array}$

Assume the company produced 10,000 units of inventory and sold 6,000 of these units for $196,000.What amount of finished goods will be reported on the balance sheet at the end of the year under variable costing?
A) $100,000
B) $96,000
C) $64,000
D) None of these answers are correct.

Quizplus · Accepted Answer

Under variable costing, only variable costs are included in inventory. The variable cost per unit is calculated as (Direct Materials + Direct Labor + Variable Manufacturing Overhead) / Total Units Produced = ($60,000 + $80,000 + $20,000) / 10,000 = $16 per unit. The ending inventory is 4,000 units (10,000 produced - 6,000 sold), so the finished goods inventory is 4,000 units x $16 = $64,000.

The Accounting Records for Moss Manufacturing Company Included the Following