Coswell Company produces plastic that is used for injection-molding applications
ID: 2466820 • 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 4,800 tons of plastic and sold 2,880 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 18% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed manufacturing costs were $2,640,000, and fixed administrative expenses were $519,000.
Explanation / Answer
Solution:
Income Statement - Absorption costing Sales revenue 6,048,000 Less: Cost of goods sold Variable manufacturing overhead - 18% * 4800 units * 2100 1,814,400 Fixed cost 2,640,000 Total cost of goods manufactured 4,454,400 Less: Ending inventory - $ 4,454,400 / 4,800 * 1,920 tons 1,781,760 Add: variable selling expense - 10% * 6,048,000 604,800 Add: Fixed administrative expenses 519,000 Cost of goods sold 3,796,440 Net income 2,251,560