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Problem P5-1 Variable and Full Costing: Sales Constant but Production Fluctuates Spencer Electronics produces a wireless home lighting device that allows consumers to turn on
Problem P5-1 Variable and Full Costing: Sales Constant but Production Fluctuates | ||||||||
Spencer Electronics produces a wireless home lighting device that allows consumers to turn on home lights from their cars and light a safe path into and through their homes. Information on the first three years of business is as follows: | ||||||||
2011 | 2012 | 2013 | Total | |||||
Units sold | 15,000 | 15,000 | 15,000 | 45,000 | ||||
Units produced | 15,000 | 20,000 | 10,000 | 45,000 | ||||
Fixed production costs | $750,000 | $750,000 | $750,000 | |||||
Variable production costs per unit | 150 | 150 | 150 | |||||
Selling price per unit | 250 | 250 | 250 | |||||
Fixed selling and administrative expense | 220,000 | 220,000 | 220,000 | |||||
Required: | ||||||||
Part a: Calculate profit and the value of ending inventory for each year using full costing. | ||||||||
2011 | 2012 | 2013 | ||||||
Fixed manufacturing overhead | Amount | Amount | Amount | |||||
Divided by ??? | Number | Number | Number | |||||
Title | Formula | Formula | Formula | |||||
Title | Amount | Amount | Amount | |||||
Full cost per unit | Formula | Formula | Formula | |||||
Sales | Amount | Amount | Amount | |||||
Less cost of goods sold: | ||||||||
2008 | Formula | |||||||
2009 | Formula | |||||||
2010 | Formula | |||||||
Gross margin | Amount | Amount | Amount | |||||
Less ??? | Amount | Amount | Amount | |||||
Net income | Formula | Formula | Formula | Formula | ||||
Ending inventory 2008 | Formula | |||||||
Ending inventory 2009 | Formula | |||||||
Ending inventory 2010 | Formula | |||||||
Part b: Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost of structure remain constant. | ||||||||
Enter text answer here. | ||||||||
Part c: Calculate profit and the value of ending inventory for each year using variable costing. | ||||||||
2011 | 2012 | 2013 | ||||||
Fixed manufacturing overhead | Amount | Amount | Amount | |||||
Title | Amount | Amount | Amount | |||||
Units sold | Amount | Amount | Amount | |||||
Selling price per unit | Value | Value | Value | |||||
Sales | Formula | Formula | Formula | |||||
Less ??? | Amount | Amount | Amount | |||||
Title | Formula | Formula | Formula | |||||
Less fixed costs: | ||||||||
Title | Amount | Amount | Amount | |||||
Title | Amount | Amount | Amount | |||||
Title | Formula | Formula | Formula | Formula | ||||
Ending inventory 2008 | Amount | |||||||
Ending inventory 2009 | Amount | |||||||
Ending inventory 2010 | Amount | |||||||
Part d: Explain why, using variable costing, profit does not fluctuate from year to year. | ||||||||
Enter text answer here. |
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