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 cost per unit $150 $150 $150

Selling price per unit $250 $250 $250

Fixed selling and

administrative expense $220,000 $220,000 $220,000

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REQUIRED:

A) Calculate profit and the value of ending inventory for each year using full cost.

B) Explain why profit fluctuates from year to year even though the number of units sold, the selling price, and the cost structure remain constant.

C) Calculate profit and the value of ending inventory for each year using variable costing.

D) Explain why, using variable costing, profit does not fluctuate from year to year.

Marvin company has three service departments, S1, S2, and S3, and two production departments, P1 and P2. The following data relate to marvin's allocation of service department costs:

Budgeted Costs Number of Employees

S1 $4,000,000 80

S2 3,000,000 60

S3 2,000,000 30

P1 200

P2 300

Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs.

REQUIRED:

A) Allocate service department costs to production departments.

B) Calculate the total service department cost allocated to each production department.