Scott Manufacturing makes only one product with total unit manufacturing costs of $54, of which $40 is variable. No units were on hand at the beginning of 2019. During 2019 and 2020, the only product manufactured was sold for $65 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 2019 and 2020. Units Manufactured Units Sold 2019 110,000 90,000 2020 110,000 120,000 a) Prepare gross profit computations for 2019 and 2020 using absortion costing b) Prepare gross profit compuations for 2019 and 2020 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.
Scott Manufacturing makes only one product with total unit
| Units Manufactured | Units Sold | |
| 2019 | 110,000 | 90,000 |
| 2020 | 110,000 | 120,000 |
a) Prepare gross profit computations for 2019 and 2020 using absortion costing
b) Prepare gross profit compuations for 2019 and 2020 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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