Peggy\'s Pillows produces and sells a decorative pillow for $75.00 per unit. In

Question

Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:

Variable manufacturing costs $20.00 per unit
Variable marketing costs $ 3.00 per unit
Fixed manufacturing costs $ 7.00 per unit
Administrative expenses, all fixed $15.00 per unit
Ending inventories:
Direct materials -0-
WIP -0-
Finished goods 250 units
What is cost of goods sold per unit using variable costing?
a. $20
b. $23
c. $30
d. $45
4. Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes:

Variable manufacturing costs $20.00 per unit
Variable marketing costs $ 3.00 per unit
Fixed manufacturing costs $ 7.00 per unit
Administrative expenses, all fixed $15.00 per unit
Ending inventories:
Direct materials -0-
WIP -0-
Finished goods 250 units
What is cost of goods sold using variable costing?
a. $35,000
b. $40,000
c. $47,250
d. $54,000

Explanation / Answer

In Variable Costing ,only Variable Manufaturing Costs are included. Hence , Cost of Goods Sold using Variable Costing would be : a.$20. The total Cost of Goods Sold using Variable Costing would be : $20 x 1750 = $35,000 The total Cost of Goods Sold using Variable Costing would be : $20 x 1750 = $35,000

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