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
Overhead 80,000 430,000
Gross Profit 170,000
Selling and Administrative 70,000
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 overhead per unit 4
Fixed overhead per unit 10
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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