Coswell Company produces plastic that is used for injection-molding applications
ID: 2465248 • 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.
Prepare income statements for each year using absorption costing.
Explanation / Answer
Calculation of predetermined overhead rate
beginning inventory 900 production 4500 3600 Available for sale 4500 4500 less sales 3600 4500 Ending incventory 900 0 Manufacturing cost per unit Variable cost per unit $ 352.00 ($2200 x 16%) Fixed cost per unit $ 570.00 ($2565000 / 4500) $ 922.00