Lone Star has computed the following unit costs for the year just ended: Direct

Question

Lone Star has computed the following unit costs for the year just ended:

Direct materials used                                        $12

Direct labor                                                       18

Variable manufacturing overhead                        25

Fixed manufacturing overhead                            29

Variable selling and administrative cost               10

Fixed selling and administrative cost                   17

Under variable costing, each unit of the company's inventory would be carried at:

$35 $55 $65 $84 some other amount

Explanation / Answer

Hi,

Please find the answer as follows;

Variable Costing Inventory = 12 (Direct Material) + 18 (Direct Labor) + 25 (Variable Manufacturing Overhead) = $55

Option B ($55) is the correct answer.

Thanks.

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