Posted: April 30th, 2016

What is the value of ending inventory using the variable costing method?

PTS: 1 DIF: Difficult OBJ: 18-2 NAT: AACSB Analytic

13. Perry Products is thinking of expanding their product line. Their current income statement is as follows:
Revenues $600,000
Cost of Goods Sold:
Direct Materials $250,000
Direct Labor 100,000
Overhead 80,000 430,000
Gross Profit 170,000
Selling and Administrative 70,000
Operating Income $100,000

The cost of the new product is $95 per unit made up of $50 of direct materials, $35 of direct labor and $10 of overhead per unit. What is the bid price assuming Perry utilizes a mark-up on direct materials?
a. $70
b. $133
c. $119
d. $19.77

14. The following information pertains to Stark Corporation:

Beginning inventory 0 units
Ending inventory 5,000 units
Direct labor per unit $20
Direct materials per unit 16
Variable overhead per unit 4
Fixed overhead per unit 10
Variable selling costs per unit 12
Fixed selling costs per unit 16

What is the value of ending inventory using the variable costing method?
a. $310,000
b. $250,000
c. $200,000
d. $390,000

15. Toshi Company incurred the following costs in manufacturing desk calculators:

Direct materials $14
Indirect materials (variable) 4
Direct labor 8
Indirect labor (variable) 6
Other variable factory overhead 10
Fixed factory overhead 28
Variable selling expenses 20
Fixed selling expenses 14

During the period, the company produced and sold 1,000 units.