Patsys Pillows produces and sells a decorative pillow for $50 per unit. In its first month of operation, the company produced 5,000 pillows and sold 3,000 pillows. There were no beginning inventories. Cost information for the month was as follows:

Variable Manufacturing Costs = $20/unit produced

Variable Marketing Costs = $10/unit sold

Fixed Manufacturing Costs = $60,000

Fixed Administrative Expense = $15,000

1.What is the value of ending inventory using variable costing?

2.What is the value of ending inventory using absorption costing?

3.What are profits using variable costing? (hint: use contribution I/S)

4.What are profits using absorption costing? (hint: use traditional I/S)

5.How would the answers to (3) and (4) change if the firm instead produced 4,000 units instead of 5,000 units and all other information remains the same?