Question

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (17,400 units): Direct materials $174,800 Direct labor 229,200 Variable factory overhead 253,700 Fixed factory overhead 97,800 $755,500 Operating expenses: Variable operating expenses $133,900 Fixed operating expenses 46,700 180,600 If 2,000 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is
a.$90,989
b.$86,839
c.$75,600
d.$107,598

Answer 1

Answer:

a.$90,989

Explanation:

Under variable costing balance sheet, only the variable cost of unsold units, is added to the unsold inventory held in hand.

Also the fixed cost is charged to income statement fully.

Thus, cost for 2,000 units unsold, as on the variable balance sheet.

Direct Material = $\frac{174,800}{17,400} \times 2,000$ = $20,092

Direct Labor = $\frac{229,200}{17,400} \times 2,000$ = $26,345

Variable Factory Overhead = $\frac{253,700}{17,400} \times 2,000$ = $29,161

Variable Operating Expenses = $\frac{133,900}{17,400} \times 2,000$ = $15,391

Total = $90,989