Jackson Company Produces plastic that is used for injection molding applications
ID: 2545268 • Letter: J
Question
Jackson Company Produces plastic that is used for injection molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,000 tons of plastic and sold 3,500 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable manufacturing costs were 15% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed manufacturing costs were $2,800,000, and fixed administrative expenses were $500,000. Instructions
(A) Prepare income statements for each year using variable costing
(B) Prepare income statements for each year using absorption costing.
Explanation / Answer
Answer
Year 1
Year 2
Produced
4000
3500
Sold
3500
4000
Sp per unit
2000
2000
Variable manufacturing cost
300
300
Variable selling expenses per unit
200
200
Fixed manufacturing cost
2800000
2800000
Units produced
4000
3500
Fixed manufacturing cost per unit
700
800
Production Costs:
Variable cost per unit
300
300
Fixed manufacturing cost per unit
700
800
Total production cost per unit
1000
1100
Year 1 ($)
Year 2 ($)
Sales
7000000
8000000
Less: Cost of Goods Sold
Opening Inventory
500000
Add: Production cost
[4000x1000] 4000000
[3500x1100] 3850000
Less: Ending inventory cost
500000
0
Cost of Goods Sold
3500000
4350000
Gross Profits
3500000
3650000
Less: Operating expenses
Variable selling expenses
700000
800000
Fixed administrative expenses
500000
500000
Net Income
$2300000
$2350000
Year 1 ($)
Year 2 ($)
Sales
7000000
8000000
Less: variable costs
variable production cost
1050000
1200000
variable selling & administrative cost
700000
800000
Total Variable cost
1750000
2000000
Contribution margin
5250000
6000000
Less; Fixed Costs
Fixed manufacturing cost
2800000
2800000
Fixed Selling & administrative cost
500000
500000
Total fixed cost
3300000
3300000
Net Income
$1950000
$2700000
Year 1
Year 2
Produced
4000
3500
Sold
3500
4000
Sp per unit
2000
2000
Variable manufacturing cost
300
300
Variable selling expenses per unit
200
200
Fixed manufacturing cost
2800000
2800000
Units produced
4000
3500
Fixed manufacturing cost per unit
700
800
Production Costs:
Variable cost per unit
300
300
Fixed manufacturing cost per unit
700
800
Total production cost per unit
1000
1100
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