Octagonal Company has the following information for 2016: Selling price $150 per unit
Variable production costs $40 per unit produced Variable selling and admin. expenses $16 per unit sold Fixed production costs $200,000
Fixed selling and admin. expenses $140,000 Units produced 10,000 units
Units sold 8,000 units
There were no beginning inventories.
What is the cost of ending inventory for Octagonal using the variable costing method?
A) $80,000
B) $180,000
C) $120,000
D) $300,000

Question

Quizplus · Accepted Answer

Under variable costing, only variable production costs are included in inventory. With 2,000 units in ending inventory (10,000 produced - 8,000 sold) and a variable production cost of $40 per unit, the cost of ending inventory is 2,000 units * $40/unit = $80,000.

Octagonal Company Has the Following Information for 2016: Selling Price