es Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 21,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 16,900 tons. Based on projected production and sales of 16,900 tons, the company estimates the following income using absorption costing. Sales (16,900 tons at $80 per ton) $ 1,352,000 Cost of goods sold (16,900 tons at $60 per 1,014,000 ton) Gross profit Selling and administrative expenses Income 338,000 338,000 $ 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 ($676,000/16,900 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 $236,600 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 21,125 ton level even though it expects to sell only 16,900 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 21,125 tons and sales of 16,900 tons. Can the company report a positive income by increasing production to 21,125 tons and storing the 4,225 tons of excess production in inventory? 2. By how much does income increase by when producing 21,125 tons and storing 4,225 tons in inventory compared to only producing 16,900 tons? Complete this question by entering your answers in the tabs below. Required Required 1 2 Prepare an income statement using absorption costing based on production of 21,125 tons and sales of 16,900 tons. Can the company report a positive income by increasing production to 21,125 tons and storing the 4,225 tons of excess production in inventory? Note: Round your answers to the nearest whole dollar. BLAZER CHEMICAL Income Statement (Absorption Costing) Did the company report a positive income? 0 $ 0

es Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 21,125 tons of its granular. Because of this year's mild winter, projected demand for its product is only 16,900 tons. Based on projected production and sales of 16,900 tons, the company estimates the following income using absorption costing. Sales (16,900 tons at $80 per ton) $ 1,352,000 Cost of goods sold (16,900 tons at $60 per 1,014,000 ton) Gross profit Selling and administrative expenses Income 338,000 338,000 $ 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 ($676,000/16,900 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 $236,600 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 21,125 ton level even though it expects to sell only 16,900 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 21,125 tons and sales of 16,900 tons. Can the company report a positive income by increasing production to 21,125 tons and storing the 4,225 tons of excess production in inventory? 2. By how much does income increase by when producing 21,125 tons and storing 4,225 tons in inventory compared to only producing 16,900 tons? Complete this question by entering your answers in the tabs below. Required Required 1 2 Prepare an income statement using absorption costing based on production of 21,125 tons and sales of 16,900 tons. Can the company report a positive income by increasing production to 21,125 tons and storing the 4,225 tons of excess production in inventory? Note: Round your answers to the nearest whole dollar. BLAZER CHEMICAL Income Statement (Absorption Costing) Did the company report a positive income? 0 $ 0

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 4CMA: Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold...

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