During Its First Year of Operations,the McCormick Company Incurred the Following

question 198

Multiple Choice

During its first year of operations,the McCormick Company incurred the following manufacturing costs: Direct materials,$5 per unit,Direct labor,$3 per unit,Variable overhead,$4 per unit,and Fixed overhead,$250,000.The company produced 25,000 units,and sold 20,000 units,leaving 5,000 units in inventory at year-end.What is the value of ending inventory under variable costing?

• A)$60,000
• B)$110,000
• C)$50,000
• D)$250,000
• E)$310,000

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Definitions:

Fixed Cost

Expenses that do not change in the short term, irrespective of the level of production or sales volume.

Average Total Cost

The total cost of production divided by the number of units produced, calculating the per-unit cost to produce goods or services.

Variable Cost

Costs that change in proportion to the good or service that a business produces, such as raw materials and labor.

Fixed Costs

Costs that do not change with the level of output or production, such as rent, salaries, and insurance payments.