The following information is available for Dunworth Canoes, a company that builds inexpensive aluminum canoes:

In its first year of operation, the company produced 18,000 units but was able to sell only 16,000 units, In its second year, the company needed to get rid of excess inventory (the extra 2,000 units produced but not sold in 2011) so it cut back production to 14,000 units.

Required
a. Calculate profit for both years using full costing.
b. Note that profit has declined in 2012. Is company performance actually worse in 2012 compared to 2011?
c. Calculate profit for both years using variable costing.
d. Does variable costing profit present a more realistic view of firm performance in the two years?Explain.

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Total 32,000 32,000 2011 2012 Units produced Units sold Selling price per unit Variable Direct material per unit Direct labor per unit Variable manufacturing overhead 18,000 16,000 500 S 200 5 80 14,000 16,000 $500 $200 5 80 production costs per unit per unit peryear expense per year $70 630,000 $200,000 Fixed manufacturing overhead 5630,000 Fixed selling and administrative 200,000