A manufacturing company that produces a single product has provided the followin

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $174 Units in beginning inventory 0 Units produced 10,100 Units sold 9,500 Units in ending inventory 600 Variable cost per unit: Direct materials $56 Direct labor $50 Variable manufacturing overhead $15 Variable selling and administrative $6 Fixed costs: Fixed manufacturing overhead $313,100 Fixed selling and administrative expenses $114,000 What is the total period cost for the month under variable costing?

Explanation / Answer

The total period cost under variable costing approach would comprise of all fixed costs and variable selling and administrative cost (as it not treated as a part of product cost). The formula for calculation total period cost can be derived as follows:

Total Period Cost (Variable Costing) = Fixed Manufacturing Overhead + Fixed Selling and Administrative Expenses + Variable Selling and Administrative Expenses (Selling Price*ariable selling and Administrative Expense Per Unit)

_________

Solution:

Using the information provided in the question, we get,

Total Period Cost (Variable Costing) = 313,100 + 114,000 + 6*9,500 = $484,100 (answer)

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