Firemaster BBQ produces stainless steel propane gas grills. The company has been in operation for three years, and sales have declined each year due to increased competition. The following information is available:

Required
a. Calculate profit and the value of ending inventory (using LIFO) for each year under full costing.
b. Calculate profit and the value of ending inventory for each year under variable costing.
c. Explain how management of Firemaster could manipulate earnings in 2012 by producing more units than are actually needed to meet demand. Could this approach to earnings management be repeated year afteryear?

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2011 Total 22,000 70,000 20,000 70,000 2012 2013 Units sold Units produced Fixed production costs Variable production costs 25,000 25,000 23,000 25,000 $30,000,000 $30,000,000 30,000,000 per unit Selling price per unit Fixed selling and administrative $1,000 $1,00 1,000 $2,500 2,500 2,500 expense $350,000 $ 350,000 350,000