Problem 226A Jackson Company produces plastic that is used f

Problem 22-6A Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,000 tons of plastic and sold 3,500 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000 variable manufacturing costs were 15% of the sales price of units produced variable selling expenses were 10% of the selling price of u its sold fixed manufacturing costs were $2,800,000, and fixed administrative expenses were $500,000. Prepare income statements for each year using variable costing. ACKSON COMPANY Income Statement Variable Costing

Solution

Answer

2016

2017

Units Produced

4000

3500

Units Sold

3500

4000

Sales Revenue

7000000

8000000

Less: Variable cost

Variable manufacturing Cost

1050000

1200000

Variable Selling expenses

700000

800000

Total Variable cost

1750000

2000000

Contribution mArgin

5250000

6000000

Less: Fixed Costs

Manufacturing cost

2800000

2800000

Administrative expenses

500000

500000

Total Fixed Expenses

3300000

3300000

Net Income/(Loss)

1950000

2700000

2016

2017

Units Produced

4000

3500

Units Sold

3500

4000

Sales Revenue

7000000

8000000

Less: Cost of Goods Sold

Variable manufacturing Cost

1050000

1200000

Variable Selling expenses

700000

1750000

800000

2000000

Opening Stock

412500

Manufacturing cost

2450000

2800000

Administrative expenses

437500

2887500

500000

3712500

Total Cost

4637500

5712500

Net Income/(Loss)

2362500

2287500

2016

2017

Variable Costing Net Income

1950000

2700000

Fixed manufacturing Overhead expensed with Variable Costing

3300000

3300000

Less: fixed manufacturing overhead with Absorption costing

-2887500

-3712500

Difference

412500

-412500

Absorption costing Net Income

2362500

2287500

	2016	2017
Units Produced	4000		3500
Units Sold	3500		4000
Sales Revenue		7000000		8000000
Less: Variable cost
Variable manufacturing Cost	1050000		1200000
Variable Selling expenses	700000		800000
Total Variable cost		1750000		2000000
Contribution mArgin		5250000		6000000
Less: Fixed Costs
Manufacturing cost	2800000		2800000
Administrative expenses	500000		500000
Total Fixed Expenses		3300000		3300000
Net Income/(Loss)		1950000		2700000