The following information is available for Skipper Pools, a manufacturer of above-ground swimming pool kits: In its
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In its first year of operation, the company produced 12,000 units but was able to sell only 10,000 units. In its second year, the company needed to get rid of excess inventory (the extra 2,000 units produced but not sold in 2014), so it cut back production to 8,000 units.
Required
a. Calculate profit for both years using full costing.
b. Note that profit has declined in 2015. Is company performance actually worse in 2015 compared to 2014?
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.
Transcribed Image Text:
Total 20,000 20,000 2014 2015 Units produced 12,000 8,000 Units sold 10,000 4,000 4,000 $800 $1,500 $ ,500 Variable manufacturing overhead per unit300 300 $2,400,000 $2,400,000 10,000 Seling price per unit Direct material per unit Direct labor per unit $800 Fixed manufacturing overhead per year Fixed selling and administrative expense per year $1,500,000 1,500,000
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a 2014 2015 Fixed manufacturing overhead 2400000 2400000 Divided by units produced 12000 8000 Fixed ...View the full answer
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