Jackson Company produces plastic that is used for injection-molding applications
ID: 2559047 • 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 3,900 tons of plastic and sold 3,510.0 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,100, variable manufacturing costs were 15% of the sales price of units produced, variable selling expenses were 11% of the selling price of units sold, fixed manufacturing costs were $2,886,000, and fixed administrative expenses were $520,000.Explanation / Answer
Answer:
2016
2017
variable costing net income
2048540
2654600
Fixed manufacturing overhead expensed with
variable costing
2886000
2886000
Less: Fixed manufacturing overhead expansed
with absorption costing
2597400
3174600
Diffrance
288600
-288600
absorption costing net income
2337140
2366000
Working notes for the above answer si as under
1
In 2016, with absorption costing, Fixed admin is calculated as
=2886,000* (3510/3900)
=2597400
2
In 2017, with absorption costing $3174600 of fixed manufacturing overhead is expensed as part of cost of goods sold. This includes the fixed manufacturing overhead for 2014 of$288600 plus $288600 of fixed manufacturing overhead from 2016 that was included in thebeginning inventory for 2017
=2886000+288600
=3174600
2016
2017
variable costing net income
2048540
2654600
Fixed manufacturing overhead expensed with
variable costing
2886000
2886000
Less: Fixed manufacturing overhead expansed
with absorption costing
2597400
3174600
Diffrance
288600
-288600
absorption costing net income
2337140
2366000
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