PROBLEMS PROBLEM 5-1. Variable and Full Costing: Sales Constant but Production Fluctuates [LO 1, 2] 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 3 years of business is as follows: EXCEL Units sold Units produced Fixed production costs Variable production costs per unit Selling price per unit Fixed selling and administrative expense 2017 20,000 20,000 $750,000 $ $ 2018 20,000 25,000 $750,000 150 $ 150 $ 250 250 $220,000 $220,000 2019 Total 20,000 60,000 15,000 60,000 $750,000 $ 150 $ 250 $220,000 REQUIRED a. Calculate profit and the value of ending inventory for each year using full costing. b. Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant. c. Calculate profit and the value of ending inventory for each year using variable costing. d. Explain why, using variable costing, profit does not fluctuate from year to year.

PROBLEM 5-1. Variable and Full Costing: Sales Constant but Production Fluctuates [LO 1, 2] 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 3 years of business is as follows: REQUIRED a. Calculate profit and the value of ending inventory for each year using full costing. b. Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant. c. Calculate profit and the value of ending inventory for each year using variable costing. d. Explain why, using variable costing, profit does not fluctuate from year to year