Variable and Full Costing: 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:

	2014	2015	2016	Total
Units sold	20,000	20,000	20,000	60,000
units produced	25,000	25,000	15,000	60,000
fixed production cost	$750,000	$750,000	$750,000
variable production costs per unit	$150	$150	$150
Selling price per unit	$250	$250	$250
Fixed selling and admin expense	$220,000	$220,000	$220,000

Required

1. Calculate profit and the value of ending inventory for each year using full costing.

2. Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant.

3. Calculate profit and the value of ending inventory for each year using variable costing.

4. Explain why, using variable costing, profit does not fluctuate from year to year.