A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units) : Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

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Mitchell

Business

15 June, 13:31

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units) : Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

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Marley · Answer 1

If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is $52,500

Explanation:

For computing how much amount is recorded in the balance sheet, first we have to calculate the per unit cost.

The formula to compute the per unit cost is shown below:

= Total production cost : Number of units

where,

Total production cost = Direct labor + Direct material + Variable factory overhead

= 240,000 + $180,000 + 280,000

= $700,000

And, the number of unit is 20,000 units

Now, put these values on the above equation which is equals to

= $700,000 : 20,000

= $35 per unit

After that, multiply the per unit cost with unsold units

In mathematically,

= 1,500 units * $35 per unit

= $52,500

Hence, If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is $52,500