Coswell Company produces plastic that is used for injection-molding applications
ID: 2504338 • 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 4,400 tons of plastic and sold 3,300 tons. In 2012, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable manufacturing costs were 17% of the sales price of units produced, variable selling expenses were 9% of the selling price of units sold, fixed manufacturing costs were $2,420,000, and fixed administrative expenses were $584,000.
Prepare an absorption income statement.
Explanation / Answer
Income Statement Using Absorption Approach Year 2011 Year 2012 Total sales 6,600,000 8,800,000 Cost of Good Sold: Beginning Inventory - 979,000 Variable Manufacturing Cost 1,496,000 1,122,000 Fixed manufacturing cost 2,420,000 2,420,000 Less: Ending Inventory 979,000 - Cost of Good Sold 2,937,000 4,521,000 Gross Profit 3,663,000 4,279,000 Total selling and administrative expenses: Variable selling expenses 594,000 792,000 Fixed administrative expenses 584,000 584,000 Total selling and administrative expenses 1,178,000 1,376,000 Net Income 2,485,000 2,903,000