Coswell Company produces plastic that is used for injection-molding applications
ID: 2464817 • Letter: C
Question
Coswell Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2011, the first year of operations, Coswell produced 5,700 tons of plastic and sold 3,990 tons. In 2012, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,100, variable manufacturing costs were 19% of the sales price of units produced, variable selling expenses were 12% of the selling price of units sold, fixed manufacturing costs were $3,192,000, and fixed administrative expenses were $585,000. Prepare income statements for each year using variable costing.
Explanation / Answer
Income Statement for 2011
Sales ( 3990 tons * 2100 ) : 8379,000
Less : Variable costs of good sold ( 19% * 5700 * 2100 ) : 2274,300
Less : Variable Selling Expenses ( 12% * 8379000) : 1005,480
Gross Contribution Margin : 5099,220
Less : Period Costs
Manufacturing costs : 3192,000
Administrative Expenses : 585000
Net Income 1322,220