Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the same unit costs in all years): $\begin{array}{lr}
\text { Selling price } & \$ 9.00 \text { per mug } \
\text { Variable production cost } & \$ 2.50 \text { per mug } \
\text { Variable selling cost } & \$ 1.10 \text { per mug } \
\text { Fixed production cost } & \$ 100,000 \text { per month }\
\text { Fixed selling and administrative cost }& \$ 60,000 \text { per month }\
\end{array}$
$\text { Production and sales in units for the first three months of } 2017 \text { are as follows: }$

$\begin{array}{lll}\text { Year}&\text { Production}&\text { Sales }\
\text { January } & 50,000 & 44,000 \
\text { February } & 40,000 & 45,000 \
\text { March } & 44,000 & 46,000
\end{array}$ Inventory at January 1, 2017 consisted of 1,000 mugs.Which two months would have the same net income under full costing?

Question

Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the same unit costs in all years): $\begin{array}{lr}
\text { Selling price } & \$ 9.00 \text { per mug } \
\text { Variable production cost } & \$ 2.50 \text { per mug } \
\text { Variable selling cost } & \$ 1.10 \text { per mug } \
\text { Fixed production cost } & \$ 100,000 \text { per month }\
\text { Fixed selling and administrative cost }& \$ 60,000 \text { per month }\
\end{array}$
$\text { Production and sales in units for the first three months of } 2017 \text { are as follows: }$

$\begin{array}{lll}\text { Year}&\text {  Production}&\text { Sales }\
\text { January } & 50,000 & 44,000 \
\text { February } & 40,000 & 45,000 \
\text { March } & 44,000 & 46,000
\end{array}$ Inventory at January 1, 2017 consisted of 1,000 mugs.Which two months would have the same net income under full costing?

Quizplus · Accepted Answer

Under full costing, both fixed and variable costs are allocated to the cost of production. The net income in each month would differ due to changes in the number of units produced and sold, affecting how fixed costs are allocated and how inventory is valued. With different production and sales figures each month, and starting with an inventory of 1,000 mugs, the cost of goods sold and ending inventory valuation would differ each month, leading to different net incomes.

Brislin Gifts Makes Ceramic Mugs and Has the Following Amounts