Problems - Variable Costing
XM Outfitters produces Kayaks, information for the first three years of business is as follows:
| |
2014 |
2015 |
2016 |
Total |
| Units Sold |
5,000 |
5,000 |
5,000 |
15,000 |
| Units Produced |
5,000 |
6,000 |
4,000 |
15,000 |
| Fixed Production Costs |
$50,000 |
$50,000 |
$50,000 |
|
| Variable Production Costs per Unit |
$75 |
$75 |
$75 |
|
| Selling Price |
$225 |
$225 |
$225 |
|
| Fixed Selling and Administrative Expenses |
$5,000 |
$5,000 |
$5,000 |
|
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 units sold and selling price remains the same.
3. Calculate profit and the value of ending inventory for each year using variable costing.
4. Explain why when using variable costing profit does not fluctuate from year to year
Cite references use for explanations.
Show or explain formulas used.