McFadden, Inc. has collected the following data. (There are no beginning inventories.) Units produced 600 unitsSales price $150 per unitDirect materials $40 per unitDirect labor $13 per unitVariable manufacturing overhead $6 per unitFixed manufacturing overhead $19,500 per yearVariable selling and administrative costs $4 per unitFixed selling and administrative costs $15,700 per yearRequired:What is the ending balance in Finished Goods Inventory using variable costing if 450 units are sold? A.$6,000B.$8,850C.$7,950D.$2,850

The correct answer is B.

Explanation:

Giving the following information:

Units produced 600 units

Direct materials $40 per unit

Direct labor $13 per unit

Variable manufacturing overhead $6 per unit

Variable selling and administrative costs $4 per unit

The variable costing method calculates the cost of goods based on direct material, direct labor, and variable manufacturing overhead.

First, we need to calculate the unitary cost of production:

unitary cost = 40 + 13 + 6 = $59

Inventory = 600 units - 450 units = 150 units

Inventory cost = 150*59 = $8,850