1. A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (19,100 units):
??? Direct materials	$170,600
??? Direct labor	224,400
??? Variable factory overhead	245,500
??? Fixed factory overhead	93,300	$733,800
Operating expenses:
??? Variable operating expenses	$125,200
??? Fixed operating expenses	40,400	165,600

If 1,900 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$63,707

b.$89,469

c.$76,169

d.$72,996

2. The level of inventory of a manufactured product has increased by 8,600 units during a period. The following data are also available:

	Variable	Fixed
Unit manufacturing costs of the period	$10	$8
Unit operating expenses of the period	$2	$3

What would be the effect on income from operations if absorption costing is used rather than variable costing?

a.$94,600 increase

b.$94,600 decrease

c.$68,800 increase

d.$68,800 decrease

3. A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (20,000 units):
Direct materials	$180,000
Direct labor	240,000
Variable factory overhead	280,000
Fixed factory overhead	100,000	$800,000
Operating expenses:
Variable operating expenses	$130,000
Fixed operating expenses	50,000	180,000

If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$66,400

b.$78,400

c.$56,000

d.$64,000