Concept explainers
Prepare income statements under absorption costing and variable costing for a company with beginning inventory, and reconcile differences
(LO 5), AN
(a) 2017 $2,700,000
(b) 2017 $2,350,000
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
Instructions
(a) Prepare income statements for each year using variable costing. (Use the format from Illustration 6A-5.)
(b) Prepare income statements for each year using absorption costing. (Use the format from Illustration 6A-4.)
(c) Reconcile the differences each year in net income under the two costing approaches.
(d) _______ Comment on the effects of production and sales on net income under the two costing approaches.
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