Variable and Absorption Costing Frances Manufacturing makes only one product with total unit manufacturing costs of $70, of which $42 is variable No units were on hand at the beginning of 2015 During 2015 and 2016, the only product manufactured was sold for $107 per unit, and the cost structure did not change Frances uses the first in, first out inventory method and has the following production and sales for 2015 and 2016 Units Manufactured Units Sold 2015 100,000 70,000 2016 100,000 120,000 a Prepare gross profit computations for 2015 and 2016 using absorption costing Do not use negative signs with your answers Absorption Costing 2015 2016 Sales Answer Answer Cost of goods sold Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less Ending inventory Answer Answer Cost of goods sold Answer Answer Gross profit Answer Answer b Prepare gross profit computations for 2015 and 2016 using variable costing Do not use negative signs with your answers Variable Costing 2015 2016 Sales Answer Answer Variable cost of goods sold Beginning inventory Answer Answer Production Answer Answer Goods available Answer Answer Less Ending inventory Answer Answer Variable cost of goods sold Answer Answer Less Fixed manufacturing costs Answer Answer Gross profit Answer Answer c Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing Select the most appropriate statement If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit

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Variable and Absorption Costing Frances Manufacturing makes only one product with total unit manufacturing costs of $70, of which $42 is variable. No units were

Variable and Absorption Costing Frances Manufacturing makes only one product with total unit manufacturing costs of $70, of which $42 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $107 per unit, and the cost structure did not change. Frances uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016

	Units Manufactured	Units Sold
2015	100,000	70,000
2016	100,000	120,000

a. Prepare gross profit computations for 2015 and 2016 using absorption costing. Do not use negative signs with your answers.

Absorption Costing
	2015	2016
Sales	Answer	Answer
Cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Cost of goods sold	Answer	Answer
Gross profit	Answer	Answer

b. Prepare gross profit computations for 2015 and 2016 using variable costing. Do not use negative signs with your answers.

Variable Costing
	2015	2016
Sales	Answer	Answer
Variable cost of goods sold:
Beginning inventory	Answer	Answer
Production	Answer	Answer
Goods available	Answer	Answer
Less: Ending inventory	Answer	Answer
Variable cost of goods sold	Answer	Answer
Less: Fixed manufacturing costs	Answer	Answer
Gross profit	Answer	Answer

c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absorption and variable costing. Select the most appropriate statement.

If production volume exceeds sales volume, the absorption costing gross profit will be higher than the variable costing gross profit.

If sales volume exceeds production volume, the absorption costing gross profit will be higher than the variable costing gross profit.

If production volume exceeds sales volume, the variable costing gross profit will be higher than the absorption costing gross profit.

If sales volume exceeds production volume, the variable costing gross profit will be lower than the absorption costing gross profit.