Coswell Company produces plastic that is used for injection-molding applications
ID: 2466761 • 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 5,900 tons of plastic and sold 4,130 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 19% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed manufacturing costs were $3,540,000, and fixed administrative expenses were $548,000. 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 5,900 tons of plastic and sold 4,130 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 19% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed manufacturing costs were $3,540,000, and fixed administrative expenses were $548,000 Prepare income statements for each year using variable costing. COSWELL COMPANY Income Statement For the Year Ended December 31, 2011 Variable Costing COSWELL COMPANY Income Statement For the Year Ended December 31, 2012 Variable CestingExplanation / Answer
Solution:
COSWELL COMPANY
Income statement
For the year ended 31 Dec, 2011
COSWELL COMPANY
Income statement
For the year ended 31 Dec, 2012
Notes:
31-12-11 Units produced 5,900
Units sold = 4,130 units
Closing stock = 1770 units
31-12-12
Opening stock 1770 units
Units produced 4,130
Units sold 5,900 units
Sales (4,130 * $2,200) $9,086,000 Less: Variable manufacturing costs (5,900 * $2,200 * 19%) $2,466,200 Selling expenses (4,130 * $2,200 * 10%) $908,600 Total variable expense $3,374,800 $3,374,800 Contribution margin $5,711,200 Fixed xpenses 3,540,000 Net operating income 2,171,200