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Luxury Lugs sells work bags to graduating seniors. It began business in January 2020. It uses a variable costing system for internal reporting and an

Luxury Lugs sells work bags to graduating seniors. It began business in January 2020. It uses a variable costing system for internal reporting and an absorption costing system for external reporting. Information about its first two months of operations follows.

Luxury Lugs uses the FIFO inventory costing method. Its selling price and cost structure are stable and not expected to change. Notice that variable cost per unit and total fixed cost are the same for both months.

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