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

Question

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

Quizplus · Accepted Answer

Under variable costing, only variable costs are included in inventory. The variable cost per unit is calculated by adding direct materials, direct labor, and variable manufacturing overhead, then dividing by the number of units produced. The cost per unit is $16 ($60,000 + $80,000 + $20,000) / 10,000 units. The ending inventory of 4,000 units (10,000 produced - 6,000 sold) is valued at $64,000 (4,000 units x $16).

The Accounting Records for Moss Manufacturing Company Included the Following