(Appendix) Comparison of Full-Absorption and Variable Costing, Using the Algebraic Method-Part I: Assume the following data about actual prices, costs, and volume for Derivation Company for the first quarter:

There were no beginning inventories.

Required:

a. Using the algebraic method, derive the difference in operating profits between. variable costing and full-absorption costing.

b. What is the inventory value at the end of the first quarter under (1) full- absorption costing and (2) variable costing?

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Selling price Variable manufacturing costs Fixed manufacturing costs Marketing and administrative costs (fixed and variable combined) Sales volume Production volume $5 per unit $3 per unit $100,000 for the quarter $30,000 for the quarter 100,000 units for the quarter 120.000 units for the quarter