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Calculate profit and the value of ending inventory

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Reference no: EM13945778

Problems - Variable Costing

XM Outfitters produces Kayaks, information for the first three years of business is as follows:

  2014 2015 2016       Total
Units Sold 5,000 5,000 5,000 15,000
Units Produced 5,000 6,000 4,000 15,000
Fixed Production Costs $50,000 $50,000 $50,000
Variable Production Costs per Unit $75 $75 $75
Selling Price $225 $225 $225
Fixed Selling and Administrative Expenses $5,000 $5,000 $5,000

Required:

1. Calculate profit and the value of ending inventory for each year using full costing.

2. Explain why profit fluctuates from year to year even though the units sold and selling price remains the same.

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

4. Explain why when using variable costing profit does not fluctuate from year to year

Cite references use for explanations.

Show or explain formulas used.

Reference no: EM13945778

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