Question

The Southern Corporation manufactures a single product and has the following cost structure: $ $ 32 12 Variable costs per unit: Production Selling and administrative Fixed costs per year: Production Selling and administrative $111,860 $ 92,840 Last year, 6,580 units were produced and 6,380 units were sold. There was no beginning Inventory. The carrying value on the balance sheet of the ending Inventory of finished goods under variable costing would be: Multiple Choice C ) $6.380 less than under absorption costing. 0 $3,400 less than under absorption costing. 0 the same as absorption costing- 0 $6.390 greater than under absorption costing

Answer 1

Answer:

Correct answer-------------$3,400 less than under absorption costing

Working:

Absorption costing Ending Inventory
Variable production cost	$              32
Add: Fixed production cost (111860/6580)	17
Total cost per unit	$              49
Multiplied by Units in ending Inventory	200
Ending Inventory	$        9,800

.

Variable costing Ending Inventory
Variable production cost	$                   32
Multiplied by Units in ending Inventory	200
Ending Inventory	$             6,400

.

Absorption costing Ending Inventory	$ 9,800.00
Variable costing Ending Inventory	$ 6,400.00
Difference	$ 3,400.00