Question

​McFarlane, Inc. reports the following​ information:

Units produced	580	units
Units sold	400	units
Sales price	$ 160	per unit
Direct materials	$ 29	per unit
Direct labor	$ 12	per unit
Variable manufacturing overhead	$ 15	per unit
Fixed manufacturing overhead	$ 17800	per year
Variable selling and administrative costs	$ 6	per unit
Fixed selling and administrative costs	$ 13900	per year

There are no beginning inventories. What is the ending balance in Finished Goods Inventory using variable​ costing?

Answer 1

Answer. $10,080

Working:

In the valuation of the finished inventory using the variable costing, only the direct material, direct labor, variable manufacturing overhead needed to be considered for the calculation of the cost of the value

Statement showing cost per unit under variable costing method:

Direct materials	$29
Direct labor	$12
Variable manufacturing overhead	$15
Total cost per unit	$56

So Ending Finished Goods Inventory = Unsold units × Total unit product cost = (580 units produced - 400 units sold) × $56 = $10,080