The following data relates to Alpha Company.Units in beginning inventory—Units produced25,000Units sold ($250 per unit)21,000Variable costs per unit: Direct materials$35Direct labor60Variable overhead25Fixed costs: Fixed overhead per unit produced$50Fixed selling and administrative expenses160,000Determine the value of ending inventory under variable costing.

Under variable costing, ending inventory is valued at variable costs and fixed cost is considered as period cost not a product cost. Therefore, ending inventory will be valued at variable cost per unit. Calculation of variable cost per unit: Particulars Cost per unit Direct materials $35 Direct labor 60 Variable overhead 25 Total $120 Number of units in ending inventory = Produced - sold = 25,000 - 21,000 = 4,000 units Value of ending inventory = 4,000 units * $120 per unit = $480,000

Answered: The following data relates to Alpha…

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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The following data relates to Alpha Company.

Units in beginning inventory	—
Units produced	25,000
Units sold ($250 per unit)	21,000
Variable costs per unit:
Direct materials	$35
Direct labor	60
Variable overhead	25
Fixed costs:
Fixed overhead per unit produced	$50
Fixed selling and administrative expenses	160,000

Determine the value of ending inventory under variable costing.

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