Posted: August 25th, 2016

# What is the value of ending inventory using the variable costing method?

ANS: B
Support:
Cost of Goods Sold = .60 ? \$600,000 = \$360,000
Operating Income = \$600,000 – \$360,000 – \$130,000 = \$110,000
Markup on COGS = (selling and administrative expenses + operating income) / COGS
.6667 = (\$130,000 + \$110,000) / \$360,000
PTS: 1 DIF: Difficult OBJ: 18-2 NAT: AACSB Analytic
13. Perry Products is thinking of expanding their product line. Their current income statement is as follows:
Revenues \$600,000
Cost of Goods Sold:
Direct Materials \$250,000
Direct Labor 100,000
Gross Profit 170,000
Operating Income \$100,000
The cost of the new product is \$95 per unit made up of \$50 of direct materials, \$35 of direct labor and \$10 of overhead per unit. What is the bid price assuming Perry utilizes a mark-up on direct materials?
a. \$70
b. \$133
c. \$119
d. \$19.77
14. The following information pertains to Stark Corporation:
Beginning inventory 0 units
Ending inventory 5,000 units
Direct labor per unit \$20
Direct materials per unit 16
Variable selling costs per unit 12
Fixed selling costs per unit 16
What is the value of ending inventory using the variable costing method?
a. \$310,000
b. \$250,000
c. \$200,000
d. \$390,000

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