Variable Costing, Value of Ending Inventory, Operating Income

Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs:

Direct materials	$5.00
Direct labor	3.00
Variable overhead	1.50
Fixed overhead*	7.00
Variable marketing cost	1.20

^* Fixed overhead per unit = $280,000 / 40,000 units produced = $7.

Total fixed factory overhead is $280,000 per month. During October, 38,400 units were sold at a price of $24, and fixed marketing and administrative expenses were $130,500.

Required:

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1. Calculate the cost of each unit using variable costing. Round your final answer to the nearest cent.

$fill in the blank 5cbaa3fa4039feb_1 per unit

2. How many units remain in ending inventory? fill in the blank 5cbaa3fa4039feb_2 units

What is the cost of ending inventory using variable costing? $fill in the blank 5cbaa3fa4039feb_3

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Feedback

1. Variable costing assigns only unit-level variable manufacturing costs to the cost of the product.

2. How does the beginning inventory balance factor into the calculation of ending inventory? What about units produced versus units sold? What role do those amounts play?

How does the cost per unit factor into the calculation of the cost of ending inventory?

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3. Prepare a variable-costing income statement for Pattison Products, Inc., for the month of October.

Pattison Products, Inc. Variable-Costing Income Statement For the Month of October

CashFixed costsSalesVariable costs	$- Select -
Less:
Fixed factory overheadFixed marketing and administrative expensesSalesVariable cost of goods sold	- Select -
Fixed factory overheadFixed marketing and administrative expensesSalesVariable marketing expense	- Select -
Contribution margin	$fill in the blank 2cfbf2f9cf81052_7
Less:
Fixed factory overheadSalesVariable cost of goods soldVariable marketing expense	- Select -
Fixed marketing and administrative expensesSalesVariable cost of goods soldVariable marketing expense	- Select -
Operating income	$fill in the blank 2cfbf2f9cf81052_12

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Feedback

Use a contribution margin format income statement that groups costs according to behavior (variable and fixed).

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4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory? $fill in the blank 81f44df2dfddfdd_1

What is operating income for November? $fill in the blank 81f44df2dfddfdd_2