Lorillard Corporation Has the Following Information for April, May, and June

question 67

Multiple Choice

Lorillard Corporation has the following information for April, May, and June 2018: $\begin{array} { l r r r } & \text { April } & \text { May } & \text { June } \\ \text { Units produced } & 12,500 & 12,500 & 12,500 \\ \text { Units sold } & 8,750 & 10,625 & 13,125 \end{array}$
Production costs per unit (based on 12,500 units) are as follows:
$\begin{array}{lr}\text { Direct materials } & 15 \\\text { Direct labor } & 10 \\\text { Variable factory overhead } & 7.50 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and admin. expenses } & 12.50 \\\text { Fixed selling and admin. expenses } & 5\end{array}$ There were no beginning inventories for April 2018, and all units were sold for $50. Costs are stable over the three months.
What is the May ending inventory cost for Lorillard Corporation using the variable costing method?

• A)$182,812.50
• B)$187,500
• C)$312,500
• D)$162,500

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Definitions:

Fixed Rate

A constant interest rate applied to a loan or mortgage that remains unchanged throughout the term, offering predictability in payments.

Variable Rate

An interest rate that fluctuates over time with market conditions, often applied to loans and credit.

Prime Rate

The prime rate is the interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark for various loan products.