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Question - 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
2015 = 100,000
2016 = 100,000
Units Sold
2015 = 70,000
2016 = 120,000
a. Prepare gross profit computations for 2015 and 2016 using absorption costing.
b. Prepare gross profit computations for 2015 and 2016 using variable costing.
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