The Jetson Company had 14,000 units in beginning inventory. During 2008 the comp

Question

The Jetson Company had 14,000 units in beginning inventory. During 2008 the company manufactured 90,000 units and sold 97,000 units. The company experienced the following costs (assume the same unit costs in all years):
Direct materials $11.00/unit
Direct labor $2.25/unit
Other variable costs
Manufacturing overhead $3.80/unit
Selling $1.75/unit
Other fixed costs
Manufacturing overhead $180,000
Selling $25,000
Administrative $20,000

If the company uses variable costing the ending inventory for the year would be valued at:
Answer

Explanation / Answer

Variable manufacturing costs
=========================
Direct materials                                 $11.00
Direct labor                                       $2.25
Mabufacturing OH                               $3.80
Total variable manufacturing costs     $17.05
                                                      =======

Cost of ending inventory using Variable Costing = (14,000+90,000-97,000) x $17.05
= 7,000 units X $17.05 = $119,350

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