Question

The following information is available for Pembina Pools, a manufacturer of above-ground swimming pool kits: Total 21,000 21,000 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 2017 12,690 10,500 $3,780 $770 $1,700 $289 $2,550,690 $1,492,000 2018 8,310 10,500 $3,780 $ 770 $1,700 $289 $2,550,690 $1,492,000 In its first year of operation, the company produced 12,690 units but was able to sell only 10,500 units. In its second year, the company needed to get rid of excess inventory (the extra 2,190 units produced but not sold in 2017), so it cut back production to 8,310 units. Calculate profit for both years using full costing. (Round cost per unit to 2 decimal places, e.g. 15.25 and final answers to o decimal places, e.g.125.) 2017 2018 Net profits LINK TO TEXT LINK TO TEXT Note that profit has declined in 2018. Is company performance actually worse in 2018 compared to 2017? LINK TO TEXT LINK TO TEXT Calculate profit for both years using variable costing. 2017 2018 Net profits

Answer 1

Pembina Pools
Full Costing Income Statements
	2017	2018
No of Unit sold	10500	10500
Sales Revenue @$3780	$39,690,000	$39,690,000
Cost of Goods Sold
Beginning Invenry	$0	$6,482,400
Cost of Goods Manufactured (12690 x $2960) (8310*3065.94)	$37,562,400	$25,477,961
Cost of Goods Available for Sale	$37,562,400	$31,960,361
Less: Ending Invenry (12690-10500)X2960	$6,482,400	$0
Cost of Goods Sold	$31,080,000	$31,960,361
Gross Margin	$8,610,000	$7,729,639
Selling and Administrative Expenses
Fixed	$1,492,000	$1,492,000
Total Selling and Adminstrative Expenses	$1,492,000	$1,492,000
Net Operating Income ( Loss)	$7,118,000	$6,237,639
Variable Costing Income Statements :
	2017	2018
No of Unit sold	10500	10500
Sales Revenue @$3780	$39,690,000	$39,690,000
Less : Variable
Cost of Goods Sold @$2759	$28,969,500	$28,969,500
Total Variable Costs	$28,969,500	$28,969,500
Contribution Margin	$10,720,500	$10,720,500
Fixed Costs
Manufacturing	$2,550,690	$2,550,690
Selling and Administrative	$1,492,000	$1,492,000
Total Fixed Costs	$4,042,690	$4,042,690
Net Operating Income ( Loss)	$6,677,810	$6,677,810