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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
unit sold 3000 3000 3000 9000
units produced 3000 4500 1500 9000
fixed production cost 45000 45000 45000
variable production cost p/u 75 75 75
selling price per unit 225 225 225
fixed selling and admin expenses 4500 4500 4500

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 number of units sold, the selling price, and the cost of structure remain constant.
3. Calculate profit and the value of ending inventory for each year using variable costing.
4. Explain why, using variable costing, profit does not fluctuate from year to year.

Solution Summary

The variable and full costing sales constant buy production fluctuates are determined.

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