thanks for your help Blazer Chemical produces and sells an ice-melting granular

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thanks for your help

Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nine-year history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its product is only 70 tons. Based on its predicted production and sales of 70 tons, the company projects the following income statement (under absorption costing) Sales (70 tons at $20, 600 per ton) Cost of goods sold (70 tons at $15, 00 per ton) Gross margin Selling and administrative expenses Net loss $1,400, 000 1, 050, 000 350, 000 371, 000 (21,600) Its product cost information follows and consists mainly of fixed cost because of its automated production process requiring expensive equipment. Variable direct labor and material costs per ton Fixed cost per ton ($740, 000 +70 tons) Total product cost per ton S 4,429 18, 571 $15, e00 Selling and administrative expenses consist of variable selling and administrative expenses of $300 per ton and fixed selling and administrative expenses of $350,000 per year. The company's president is concerned about the adverse reaction from its creditors and shareholders if the projected net loss is reported. The operations manager mentions that since the company has large storage capacity, it can report a net income by keeping its production at the usual 100-ton level even though it expects to sell only 70 tons. The president was puzzled by the suggestion that the company can report income by producing more without increasing sales. Required: 1. Can the company report a net income by increasing production to 100 tons and storing the excess production in inventory? complete the following income statement (using absorption costing based on production 100 tons and sales of70 tons (Round your answers to the nearest whole dollar.) Pre Next

Explanation / Answer

Production Cost of Goods sold 70Tons 100 Tons Vvariable cost per unit@4429 310000 442900 Fixed Overheads per unit 740000 740000 Total cost 1050030 1182900 Units of Production 70 100 Cost of g oods sold per unit 15000 11829 Number of units sold 70 70 Total cost of goods sold 1050000 828030 Income Statement-Absorption costing 70 Tons 100 Tons Sales revenue 1400000 1400000 Less: Cost of goods sold 1050000 828030 Gross margin 350000 571970 Less: Selling expense 371000 371000 Net income -21000 200970 Under Absorption coting, company report a higher income Yes

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