### Production Cost Analysis for a Newly Operating Business#### OverviewA business operated at full capacity (100%) during its inaugural month and incurred various production and operating costs. Detailed below is an analysis of these costs and the calculation to determine the inventory value reported on the variable costing balance sheet if 1,800 units remain unsold.#### Production Costs (for 18,200 units produced):- **Direct Materials:** $180,000- **Direct Labor:** $221,700- **Variable Factory Overhead:** $254,200- **Fixed Factory Overhead:** $93,400**Total Production Costs:** $749,300#### Operating Expenses:- **Variable Operating Expenses:** $127,900- **Fixed Operating Expenses:** $49,200**Total Operating Expenses:** $177,100#### Inventory Calculation using Variable CostingIf 1,800 units remain unsold at the end of the month, the amount of inventory reported on the variable costing balance sheet is calculated as follows:**Answer Options:**- a. $64,872- b. $77,519- c. $91,622- d. $74,107Calculate the per-unit variable cost:1. **Total Variable Costs:** - Direct Materials: $180,000 - Direct Labor: $221,700 - Variable Factory Overhead: $254,200 **Total Variable Costs = $180,000 + $221,700 + $254,200 = $655,900**2. **Per Unit Variable Cost:** \[ \text{Per unit variable cost} = \frac{\text{Total Variable Costs}}{\text{Total Units Produced}} = \frac{655,900}{18,200} \approx 36.04 \]3. **Value of Unsold Inventory:** \[ \text{Value of Unsold Inventory} = \text{Units Unsold} \times \text{Per Unit Variable Cost} = 1,800 \times 36.04 \approx 64,872 \]Thus, the correct answer is:- **a. $64,872**This detailed analysis helps in understanding the breakdown of costs in a manufacturing operation and applying variable costing methods to ascertain inventory values.

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Description: ### Production Cost Analysis for a Newly Operating Business#### OverviewA business operated at full capacity (100%) during its inaugural month and incurred various production and operating costs. Detailed below is an analysis of these costs and the

Variable costing is the method of costing, where only the variable costs are assigned to the cost of…

Business

Accounting

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (18,200 units): Direct materials $180,000 Direct labor 221,700 Variable factory overhead 254,200 Fixed factory overhead 93,400 $749,300 Operating expenses: Variable operating expenses $127,900 Fixed operating expenses 49,200 177,100 If 1,800 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. $64,872 Ob. $77,519 Oc. $91,622 Od. $74,107

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (18,200 units): Direct materials $180,000 Direct labor 221,700 Variable factory overhead 254,200 Fixed factory overhead 93,400 $749,300 Operating expenses: Variable operating expenses $127,900 Fixed operating expenses 49,200 177,100 If 1,800 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. $64,872 Ob. $77,519 Oc. $91,622 Od. $74,107

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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