Absorption Costing Income Statement: Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory. Requirement 1: To explain: Whether the company could report net profit under given circumstances.

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Answer 1

Question

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

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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…

Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 21,000 tons of its granular. Because of this year's mild winter, projected demand for its product is only 16,800 tons. Based on projected production and sales of 16,800 tons, the company estimates the following income using absorption costing. Sales (16,800 tons at $80 per ton) Cost of goods sold (16,800 tons at $60 per ton) Gross profit Selling and administrative expenses Income $ 1,344,000 1,008,000 336,000 336,000 $ 0 Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment. Direct materials Direct labor Variable overhead Fixed overhead ($672,000/16,800 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 $235,200 per…

Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 25,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 20.100 tons. Based on projected production and sales of 20.100 tons, the company estimates the following income using absorption costing. Sales (20,100 tons at $148 per ton) Cost of goods sald (20,100 tons at 360 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 Variable overhead Fixed overhead ($884,098/28,100 tons) Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative expenses of $213,400 per year. The company's president will not earn a bonus unless a positive income is reported. The…

Answer 2

Question

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 5

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Answer 6

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

Answer 7

Chapter 6, Problem 3PSA

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 1:

To explain:

Whether the company could report net profit under given circumstances.

Answer 8

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Answer 9

To determine

Concept introduction:

Absorption Costing Income Statement:

Absorption costing is the traditional method of Income statement preparation. Under absorption costing both variable and fixed costs are considered as cost of production and allocated to the units lying in the finished stock inventory.

Requirement 2:

To comment:

Whether the company should produce more quantity than expected demand and ethical considerations involved.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 6 - Prob. 1MCQ Ch. 6 - Prob. 2MCQ Ch. 6 - Prob. 3MCQ Ch. 6 - Prob. 4MCQ Ch. 6 - Prob. 5MCQ Ch. 6 - Prob. 1DQ Ch. 6 - Prob. 2DQ Ch. 6 - Prob. 3DQ Ch. 6 - Prob. 4DQ Ch. 6 - Prob. 5DQ

Solution Summary: The author explains that absorption costing is the traditional method of Income statement preparation. The company could report a net income of 281,400 by producing 100 tons and storing the excess production in inventory.

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Chapter 6 Solutions