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wyattmiller
wyattmiller
16.11.2020 • 
Business

Scott Manufacturing makes only one product with total unit manufacturing costs of $54, of which $36 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $84 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016: Units Manufactured Units Sold
2015 110,000 90,000
2006 110,000 120,000

Required:
a. Prepare gross profit computations for 2015 and 2016 using absortion costing
b. Prepare gross profit compuations for 2015 and 2016 using variable costing
c. Explain how your answers illustrate the impact of differences between production and sales volumes on the gross profits reported each year under absortion and variable costing.

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