Coswell Company produces plastic that is used for injection-molding applications
ID: 2465236 • 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 4,500 tons of plastic and sold 3,600 tons. In 2012, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,200, variable manufacturing costs were 16% of the sales price of units produced, variable selling expenses were 9% of the selling price of units sold, fixed manufacturing costs were $2,565,000, and fixed administrative expenses were $501,000.
COSWELL COMPANY
Income Statement
For the Year Ended December 31, 2011
Absorption Costing
Prepare income statements for each year using absorption costing.
Explanation / Answer
Above data can be summarised as
Fixed Manufacturing Overhead = 2565000
Absorbtion in 2011, = Overhead / units manufactured
=2565000 / 4500, =570 per unit
Income statement
Particulars Detail 2011 Detail 2012 Variable cost of manufacturing 4500 units x 2200 x 16% 1584000 3600 units x 2200 x 16 % 1267200 Fixed Manufacturing Overheads Absorbed at 570 per unit 2565000 Absorbed at 570 per unit 2052000 Cost of Goods Manufactured 4500 Units 4149000 3600 Units 3319200 Add Opening inventory Nil 0.00 900 Units 829800* Cost of Goods available for sale 4500 Units 4149000 4500 Units 4149000 Less Closing Stock 900 Units 829800* NIl 0.00 Cost of Goods Sold 3600 Units 3319200 4500 Units 4149000 ADD: Under absorbtion of Fixed Manufacturinmg cost 2565000-2052000 513000 Cost of Goods Sold (Adjusted) 3319200 4662000