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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem

Inventory Valuation under Variable Costing

Refer to the data for Pelham Company on the previous page.

Required:

  1. 1. How many units are in ending inventory?
  2. 2. Using variable costing, calculate the per-unit product cost.
  3. 3. What is the value of ending inventory under variable costing?

Use the following information for Brief Exercises 3-30 and 3-31:

During the most recent year, Pelham Company had the following data associated with the product it makes:

images

1.

To determine

Calculate the ending inventory units.

Explanation

Variable Cost:

Variable cost is the cost which varies due to the changes in the level of output to produce products and services in a relevant range.

Use the following formula to calculate the value of ending inventory units:

Ending Inventory=Beggining Inventory+Units ProducedUnits Sold

Substitute 400 units for beginning inventory, 14,000 for units produced and 13,700 for units sold in the above formula

2.

To determine

Compute the per-unit product cost with the help of variable costing.

3.

To determine

Compute the value of ending inventory with the help of variable costing.

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