Steele Corporation has the following information for January, February, and March 2011: Production costs per unit (based on 10,000 units) are as follows:
There were no beginning inventories for January 2011, and all units were sold for $50.Costs are stable over the three months.
What is the January ending inventory for Steele Corporation using the variable costing method?

Question

Steele Corporation has the following information for January, February, and March 2011:  Production costs per unit (based on 10,000 units) are as follows:
 There were no beginning inventories for January 2011, and all units were sold for $50.Costs are stable over the three months.
What is the January ending inventory for Steele Corporation using the variable costing method?

Quizplus · Accepted Answer

Using the variable costing method, only variable production costs (direct materials, direct labor, variable overhead) are included in the cost of goods sold. Fixed production costs are expensed in the period incurred. 
January Ending Inventory = Units produced - Units sold = 10,000 - 6,000 = 4,000 
Variable production cost per unit = $9 + $5 + $12 = $26 
January ending inventory value = 4,000 units x $26/unit = $104,000 
Therefore, the correct answer is option B.

Steele Corporation Has the Following Information for January, February, and March