### Operational Cost Analysis for a New BusinessA business operated at full capacity (100%) during its first month and incurred the following costs associated with the production of 19,500 units:#### Production Costs:- **Direct Materials:** $176,500- **Direct Labor:** $230,500- **Variable Factory Overhead:** $250,600- **Fixed Factory Overhead:** $93,200The total production cost amounts to **$750,800**.#### Operating Expenses:- **Variable Operating Expenses:** $122,900- **Fixed Operating Expenses:** $46,200Total operating expenses equal **$169,100**.#### Inventory Calculation:Given that 2,000 units remain unsold at the end of the month, the inventory value to be reported on a variable costing balance sheet is determined through the following options:a. $80,051 b. $67,440 c. $94,349 d. $77,005 The goal is to calculate based on these options which one reflects the correct valuation of remaining inventory using variable costing methods.

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Description: ### Operational Cost Analysis for a New BusinessA business operated at full capacity (100%) during its first month and incurred the following costs associated with the production of 19,500 units:#### Production Costs:- **Direct Materials:** $176,500

Variable costing is the method under which the contribution is computed at first, by deducting the variable cost from sales revenue and after that the net income is determined.Production costs per unit=Direct material+Direct labor+Variable factory overheadNumber of Units=$176,500+$230,500+$$250,60019,500=$657,60019,500=$33.72 Inventory value in balance sheet=Number of units unsold×Production cost per unit=2,000×$33.72=$67,440 (Option b.)

Business

Accounting

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (19,500 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead $176,500 230,500 250,600 93,200 $750,800 Operating expenses: Variable operating expenses $122,900 Fixed operating expenses 46,200 169,100 If 2,000 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is Oa. $80,051 Ob. $67,440 Oc. $94,349 Od. $77,005

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (19,500 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead $176,500 230,500 250,600 93,200 $750,800 Operating expenses: Variable operating expenses $122,900 Fixed operating expenses 46,200 169,100 If 2,000 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is Oa. $80,051 Ob. $67,440 Oc. $94,349 Od. $77,005

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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