(Refer to Exercise 17.38) Assume that WaterSafe management is considering using throughput costing for management decision making.

Required:

A. Calculate the value of ending inventory and net income before taxes for each year under throughput costing. Assume direct materials are $60 per unit.

B. Explain the difference in net income before taxes under the variable costing and throughput costing approaches for each year.

Data from Exercise 17.38:

WaterSafe Company produces a part used in the manufacture of aquarium filters. The following information pertains to the past three years of operations. WaterSafe Company uses FIFO costing.

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2015 2016 2017 Total 16,500 18,000 35,500 Units sold 15,000 18,000 Units produced 16,500 15,000 35,500 $600,000 $600,000 $600,000 Fixed production costs $165 $165 $165 Variable production costs per unit Selling price per unit $275 $275 $275 Fixed selling and administrative $150,000 $150,000 $150,000 expenses Variable selling and administrative $15 $15 $15 expenses per unit