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 12,000 units but was able to sell only 10,000 units. In its second year, the company needed to get rid of excess inventory (the extra 2,000 units produced but not sold in 2020), 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 2021. Is company performance actually worse in 2021 compared to 2020?
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.
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