Acc346 Managerial Accounting: P5-2 Hamilton Stage Supplies is a manufacturer of a specialized type

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Acc346 Managerial Accounting
Week 3 Homework

PROBLEM 5-2. Variable and Full Costing: Sales Constant but Production Fluctuates
Hamilton Stage Supplies is a manufacturer of a specialized type of light used in theaters. Information on the first three years of business is as follows:
2011 2012 2013 Total
Units sold 3,000 3,000 3,000 9,000
Units produced 3,000 4,500 1,500 9,000
Fixed production costs 45,000 45,000 45,000
Variable production costs per unit 75 75 75
Selling price per unit 225 225 225
Fixed selling and administrative expenses 4,500 4,500 4,500

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