The following information is available for Skipper Pools, a manufacturer of above ground swimming pool kits:
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?
c. Calculate profit for both years using variable costing.
d. Does variable costing profit present a more realistic view of firm performance in the two years?Explain.