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Problems http://edugen.wiley.com/edugen/courses/crs4637/rc/jiambalvo3341c05/a... PROBLEMS PROBLEM 5-1. Variable and Full Costing: Sales Constant but Production Fluctuates [LO 1, 2, 3, 5] Spencer Electronics produces a wireless home lighting device that allows consumers to turn on home lights from their cars and light a safe path into and through their homes. Information on the first three years of business is as follows: 2011 Units sold Units produced Fixed production costs Variable production costs per unit Selling price per unit 15,000 15,000 $750,000 $ 150 $ 250 2012 15,000 20,000 $750,000 $ 150 $ 250 $220,000 2013 15,000 10,000 $750,000 $ 150 $ 250 $220,000 Total 45,000 45,000 Fixed selling and administrative expense $220,000…show more content…
Could this approach to earnings management be repeated year after year? PROBLEM 5-5. Variable and Full Costing: Income Effect of Clearing Excess Inventory [LO 1, 2,3,5] The following information is available for Skipper Pools, a manufacturer of above-ground swimming pool kits: 2011 Units produced Units sold Selling price per unit Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per year Fixed selling and administrative expense per year 10,000 9,000 $ 4,000 $800 $ 1,500 $ 300 $2,400,000 $1,500,000 2012 8,000 9,000 $ 4,000 $800 $ 1,500 $ 300 $2,400,000 $1,500,000 Total 18,000 18,000 9,000 9,000 $360,000 $ 100 $ 350 $300,000 2012 8,000 9,000 $360,000 $ 100 $ 350 $300,000 2013 7,000 6,000 $360,000 $ 100 $ 350 $300,000 Total 24,000 24,000 In its first year of operation, the company produced 10,000 units but was able to sell only 9,000 units. In its second year, the company needed to get rid of excess inventory (the extra 1,000 units produced but not sold in 2011), so it cut back production to 8,000 units. Required a. Calculate profit for both years using full costing. b. Note that profit has declined in 2012. Is company performance actually worse in 2012 compared to 2011? 2 of 9 8/25/2010 10:41 PM Problems

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