Figure 7-2
Steele Ltd Production Costs Per Unit (Based on 10,000 Units) Are as February

question 25

Multiple Choice

Figure 7-2
Steele Ltd. has the following information for January, February, and March 2011: $\begin{array}{lccc} & \text { January } & \text { February } & \text { March } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Production costs per unit (based on 10,000 units) are as follows: $\begin{array}{lr}\text { Direct materials } & £ 12 \\\text { Direct labour } & 8 \\\text { Variable factory overhead } & 6 \\\text { Fixed factory overhead } & 4 \\\text { Variable selling and admin. expenses } & 10 \\\text { Fixed selling and admin. expenses } & 4\end{array}$ There were no beginning inventories for January 2011, and all units were sold for £50. Costs are stable over the three months.
-Refer to Figure 7-2. What is the March ending inventory for Steele Ltd. using the variable costing method?

• A)£120,000
• B)£104,000
• C)£260,000
• D)£15,000

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Definitions:

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to related products and services based on the activities they require.

Resource Consumption

The act of using resources, such as materials, time, and energy, in the process of producing goods and services.

Activity-Based Costing

Activity-based costing is an accounting method that assigns costs to products and services based on the activities and resources that go into producing them.

Equipment Depreciation

The allocation of the cost of physical assets over its useful life, recognizing wear and tear over time.