Problem 5.3 (LO1, 2) Variable and Full Costing: Earnings Management with Full Costing; Changes in Production and Sales 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:

	2020	2021	2022	Total
Units sold	30,000	28,000	27,000	85,000
Units produced	30,000	30,000	25,000	85,000
Fixed production costs	$30,000,000	$30,000,000	$30,000,000
Variable production costs per unit	$1,000	$1,000	$1,000
Selling price per unit	$2,500	$2,500	$2,500
Fixed selling and administrative expense	$3,500,000	$3,500,000	$3,500,000

Required

1. Calculate profit and the value of ending inventory for each year under full costing.
2. Calculate profit and the value of ending inventory for each year under variable costing.
3. Explain how management of Firemaster could manipulate earnings in 2021 by producing more units than are actually needed to meet demand. Could this approach to earnings management be repeated year after year?