Required: 1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in inventory? 2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only producing 17,400 tons?
Required: 1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in inventory? 2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only producing 17,400 tons?
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 18E
Related questions
Question
![Required:
1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
inventory?
2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only
producing 17,400 tons?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
Inventory? (Round your answers to the nearest whole dollar.)
BLAZER CHEMICAL
Income Statement (Absorption Costing)
Did the company report a positive income?
$
0
0
Required 2 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F58649d5e-7852-4c24-90a0-549be2f112a3%2F6f370504-40e9-4b6b-a3a2-ff2eba82ac74%2Fjsnoant_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required:
1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
inventory?
2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only
producing 17,400 tons?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
Inventory? (Round your answers to the nearest whole dollar.)
BLAZER CHEMICAL
Income Statement (Absorption Costing)
Did the company report a positive income?
$
0
0
Required 2 >
![Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells
21,750 tons of its granular. Because of this year's mild winter, projected demand for its product is only 17,400 tons. Based on projected
production and sales of 17,400 tons, the company estimates the following income using absorption costing.
Sales (17,400 tons at $112 per ton)
Cost of goods sold (17,400 tons at $60 per ton)
Gross profit
Selling and administrative expenses
Income
Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive
equipment.
Direct materials
Direct labor
$ 1,360,000
1,044,000
316,000
316,000
$0
Variable overhead.
Fixed overhead ($696,000/17,400 tons)
$ 13 per ton
$ 4 per ton
$ 3 per ton
$40 per ton
Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and
administrative expenses of $211,600 per year. The company's president will not earn a bonus unless a positive income is reported. The
controller mentions that because the company has large storage capacity, it can report a positive income by setting production at the
usual 21,750 ton level even though it expects to sell only 17,400 tons. The president is surprised that the company can report income
by producing more without increasing sales.
Required:
1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
inventory?
2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only
producing 17,400 tons?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F58649d5e-7852-4c24-90a0-549be2f112a3%2F6f370504-40e9-4b6b-a3a2-ff2eba82ac74%2Fyc2zsb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells
21,750 tons of its granular. Because of this year's mild winter, projected demand for its product is only 17,400 tons. Based on projected
production and sales of 17,400 tons, the company estimates the following income using absorption costing.
Sales (17,400 tons at $112 per ton)
Cost of goods sold (17,400 tons at $60 per ton)
Gross profit
Selling and administrative expenses
Income
Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive
equipment.
Direct materials
Direct labor
$ 1,360,000
1,044,000
316,000
316,000
$0
Variable overhead.
Fixed overhead ($696,000/17,400 tons)
$ 13 per ton
$ 4 per ton
$ 3 per ton
$40 per ton
Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and
administrative expenses of $211,600 per year. The company's president will not earn a bonus unless a positive income is reported. The
controller mentions that because the company has large storage capacity, it can report a positive income by setting production at the
usual 21,750 ton level even though it expects to sell only 17,400 tons. The president is surprised that the company can report income
by producing more without increasing sales.
Required:
1. Prepare an income statement using absorption costing based on production of 21,750 tons and sales of 17,400 tons. Can the
company report a positive income by increasing production to 21,750 tons and storing the 4,350 tons of excess production in
inventory?
2. By how much does income increase by when producing 21,750 tons and storing 4,350 tons in inventory compared to only
producing 17,400 tons?
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