Lorillard Corporation has the following information for April, May, and June 2016: Production costs per unit (based on 12,500 units) are as follows:
There were no beginning inventories for April 2016, and all units were sold for $50. Costs are stable over the three
Months.
What is the June ending inventory cost for Lorillard Corporation using the variable costing method?
A) $75,000
B) $125,000
C) $162,500
D) $187,500

Question

Lorillard Corporation has the following information for April, May, and June 2016:  Production costs per unit (based on 12,500 units) are as follows:
 There were no beginning inventories for April 2016, and all units were sold for $50. Costs are stable over the three
Months.
What is the June ending inventory cost for Lorillard Corporation using the variable costing method?
A) $75,000 
B) $125,000 
C) $162,500 
D) $187,500

Quizplus · Accepted Answer

Using variable costing method, the ending inventory cost for June can be calculated by:

Ending Inventory = (Number of units produced in June x Production cost per unit)

Number of units produced in June = 12,500 (given)

Production cost per unit = $12 (given)

Therefore, Ending Inventory = (12,500 x $12) = $162,500.

Hence, the correct choice is C.

Lorillard Corporation Has the Following Information for April, May, and June