A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials,$10 per unit,Direct labor,$6 per unit,Variable overhead,$70,000,and Fixed overhead,$120,000.
-Of the 10,000 units produced,9,200 were sold,and 800 remain in inventory at year-end.Under variable costing,the value of the inventory is:

Question

Quizplus · Accepted Answer

To calculate the value of the inventory under variable costing, we only consider the variable costs of production. The per unit variable cost is $10 + $6 = $16. 
Total variable costs for 10,000 units = $16 * 10,000 = $160,000
Variable cost per unit for 800 remaining units = $16
Value of the inventory = 800 * $16 = $12,800
Therefore, the answer is B.

A Manufacturer Reports the Following Costs to Produce 10,000 Units