Marginal costing values closing inventory at variable production costs only Steps:

• Total variable production costs = direct materials $80,000 + direct labour$120,000 + variable production overheads $36,000 =$236,000.
• Variable cost per unit = $236,000 ÷ 4,000 units produced =$59.
• Closing inventory units = 4,000 produced - 3,600 sold = 400 units.
• Closing inventory value = 400 units × $59 per unit =$23,600. Why B is correct:
• Under marginal (variable) costing, inventory includes only variable manufacturing costs per unit multiplied by closing units (formula: closing units × variable cost/unit), equaling $23,600 (option B). Why the others are wrong:
• A: Excludes variable production overheads, using only direct costs ($200,000 total,$50/unit, $20,000 value).
• C: Applies absorption costing by adding fixed costs (e.g., $18,000 fixed overheads at$4.50/unit yields ~$25,000).
• D: Misapplies total costs including non-production fixed selling overheads or errs in unit calculation. Final answer: B