AFN Co. produces plastic that is used for injection-molding applications: absorption vs variable costing
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AFN Co. produces plastic that is used for injection-molding applications such as gears for small motors. In 2005, the first year of operations, AFN produced 4,000 tons of plastic and sold 3,000 tons. In 2006, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable mfg. costs were 15% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed mfg. costs were $2,400,000, and fixed admin. exp. were $600,000.
a. Prepare Income Statements for ea. yr. using variable costing.
b. Prepare Income Statements for ea. yr. using absorption costing.
c. Reconcile the diff. ea. yr. in net income under the 2 costing approaches.
d. Comment on the effects of production & sales on net income under the 2 costing approaches.
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1 Statement showing unit cost under Variable and absorption costing for two ...
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