In its second year the company needed to get rid of excess

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Reference no: EM13485845

The following information is available for Captain Spa, a manufacturer of above-ground spa kits:

2011 2012 Total

Units produced 20,000 16,000 36,000

Units sold 18,000 18,000 36,000

Selling price per unit $8,000 $8,000

Direct material per unit $1,600 $1,600

Direct labor per unit $3,000 $3,000

Variable manufacturing overhead per unit $600 $600

Fixed manufacturing overhead per year $4,800,000 $4,800,000

Fixed selling and administrative expense per year $3,000,000 $3,000,000

In its first year of operation, the company produced 20,000 units, but was only able to sell 18,000 units. In its second year, the company needed to get rid of excess inventory (the extra 2,000 units produced but not sold in 2011) so it cut back production to 16,000 units.

Calculate profit for both years using full costing.

Reference no: EM13485845

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