Question: border: 0px; height: 0px; margin: 0px; padding: 0px; width: 707px> border=0 cellspacing=0 cellpadding=0> border:0px;width:645pt;height:13.2pt;background-color:transparent; colspan=9> Problem P5-1 Variable and Full Costing: Sales Constant but Production

"border: 0px; height: 0px; margin: 0px; padding: 0px; width: 707px">

border="0" cellspacing="0" cellpadding="0">

"border:0px;width:645pt;height:13.2pt;background-color:transparent;"

colspan="9">Problem P5-1 Variable and Full Costing:

Sales Constant but Production Fluctuates

"border:0px;width:645pt;height:26.4pt;background-color:transparent;"

rowspan="2" colspan="9">Spencer Electronics produces a wireless

home lighting device that allows consumers to turn on home lights

from their cars and light a safe path into and through their homes.

Information on the first three years of business is as

follows:

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">

201120122013Total

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Units sold

"border:.5pt solid;background-color:transparent;">15,000

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:transparent;">

15,000

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:transparent;">

15,000

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:transparent;">

45,000

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Units produced

"border-width:0px .5pt .5pt;border-style:none solid solid;background-color:transparent;">

15,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

20,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

10,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

45,000

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Fixed production costs

"border-width:0px .5pt .5pt;border-style:none solid solid;background-color:transparent;">

$750,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

$750,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

$750,000

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Variable production costs per unit

"border-width:0px .5pt .5pt;border-style:none solid solid;background-color:transparent;">

150

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

150

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

150

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Selling price per unit

"border-width:0px .5pt .5pt;border-style:none solid solid;background-color:transparent;">

250

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

250

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

250

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"4">Fixed selling and administrative expense

"border-width:0px .5pt .5pt;border-style:none solid solid;background-color:transparent;">

220,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

220,000

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:transparent;">

220,000

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">Required:

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">Part a: Calculate profit and the

value of ending inventory for each year using full costing.

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

colspan="3">

201120122013

"border-width:0px 0px 0px .5pt;border-style:none none none solid;background-color:transparent;"

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Fixed manufacturing overhead

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Divided by ???

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Number

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Number

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Number

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Full cost per unit

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Sales

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Less cost of goods sold:

"border-width:.5pt .5pt 0px 0px;border-style:solid solid none none;border-color:#000000;background-color:transparent;"

colspan="3">

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

2008

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border-width:0px 0px 0px .5pt;border-style:none none none solid;background-color:transparent;"

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

2009

"border:.5pt solid;background-color:rgb(255,255,204);">Formula

"border-width:0px 0px 0px .5pt;border-style:none none none solid;background-color:transparent;"

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

2010

colspan="2">

"border-width:.5pt .5pt 0px;border-style:solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Gross margin

"border-width:1pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:1pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:1pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Less ???

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Net income

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border:0px;height:13.8pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2008

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="3">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2009

"border:.5pt solid;background-color:rgb(255,255,204);">Formula

colspan="3">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2010

"border:.5pt solid;background-color:rgb(255,255,204);">Formula

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;width:645pt;height:25.95pt;background-color:transparent;"

rowspan="2" colspan="9">Part b: Explain

why profit fluctuates from year to year even though the number of

units sold, the selling price, and the cost of structure remain

constant.

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border-width:.5pt;border-style:solid;border-color:#000000 #000000;width:645pt;height:79.2pt;background-color:rgb(255,255,204);"

rowspan="6" colspan="9">Enter text answer here.

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;width:645pt;height:13.2pt;background-color:transparent;"

colspan="9">Part c: Calculate profit and

the value of ending inventory for each year using variable

costing.

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

colspan="3">

201120122013

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Fixed manufacturing overhead

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Title

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Units sold

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Selling price per unit

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Value

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Value

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Value

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Sales

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Less ???

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 1pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Formula

colspan="2">

"border:0px;height:12.75pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Less fixed costs:

"border-width:.5pt 0px;border-style:solid none;background-color:transparent;"

colspan="3">

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt .5pt 0px;border-style:none solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

"border-width:0px .5pt 0px 0px;border-style:none solid none none;background-color:rgb(255,255,204);">

Amount

colspan="2">

"border:0px;height:13.8pt;background-color:transparent;">

"border:.5pt solid;background-color:rgb(255,255,204);" colspan="3">

Title

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border-width:1pt .5pt 2pt 0px;border-style:solid solid double none;background-color:rgb(255,255,204);">

Formula

"border:0px;height:13.8pt;background-color:transparent;" colspan=

"9">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2008

"border-width:.5pt .5pt .5pt 0px;border-style:solid solid solid none;background-color:rgb(255,255,204);">

Amount

colspan="3">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2009

"border:.5pt solid;background-color:rgb(255,255,204);">Amount

colspan="3">

"border:0px;height:13.2pt;background-color:transparent;">

"border-width:.5pt;border-style:solid;border-color:#000000;background-color:rgb(255,255,204);"

colspan="3">Ending inventory 2010

"border:.5pt solid;background-color:rgb(255,255,204);">Amount

colspan="2">

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border:0px;width:645pt;height:13.2pt;background-color:transparent;"

colspan="9">Part d: Explain why, using

variable costing, profit does not fluctuate from year to year.

"border:0px;height:13.2pt;background-color:transparent;" colspan=

"9">

"border-width:.5pt;border-style:solid;border-color:#000000 #000000;width:645pt;height:118.8pt;background-color:rgb(255,255,204);"

rowspan="9" colspan="9">Enter text answer here.

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