Question

AFN Company produces plastic that is used for injection-moulding applications such as gears for small motors. In 2020, the first year of operations, AFN Company produced 4,300 tonnes of plastic and sold 3,010 tonnes. In 2021, the production and sales results were exactly reversed. In each year, the selling price per tonne was $2,100; variable manufacturing costs were 16% of the sales price for the units produced; variable selling expenses were 8% of the selling price of the units sold, fixed manufacturing costs were $3,010,000; and fixed administrative expenses were $550,400. (a) Prepare comparative income statements for each year using variable costing. (Use the format from Illustration 8.5.) AFN COMPANY Income Statement-Variable Costing For the Years Ended December 31 2020 2021 Number of units manufactured 4300 3010 4300 Number of units sold 3010 Sales $ 6321000 5 9030000

Answer 1

C D AFN COMPNAY INCOME STATEMENT-VARIABLE COSTING FOR THE YEAR ENDED DECEMBER 31 PARTICULARS 2020 2021 Number of units manufactured 4300 3010 6 Less: Number of units sold 3010 4300 7 Sales $6,321,000 $9,030,000 8 Less: Variable manufacturing cost $1,444,800 $1,011,360 9 $4,876,200 $8,018,640 10 Less: Variable selling expenses $505,6801 $722,400 11 $4,370,520 $7,296,240 12 Less: Fixed manufacturing cost $3,010,000 $3,010,000 $1,360,520 $4,286,240 14 Less: Fixed administrative expenses $550,400 $550,400 15 Net profit $810,120 $3,735,840 13

AFN COMPNAY INCOME STATEMENT-VARIABLE COSTING FOR THE YEAR ENDED DECEMBER 31 PARTICULARS 2020 2021 Number of units manufactured 4300 3010 6 Less: Number of units sold 3010 4300 7 Sales =C6*2100 =D6*2100 8 Less: Variable manufacturing cost =(4300*2100)*16% =(3010*2100) *16% =C7-C8 =D7-D8 10 Less: Variable selling expenses (C6*2100)*8% =D6*2100)*8% 11 =C9-C10 =D9-D10 12 Less: Fixed manufacturing cost 3010000 3010000 =C11-C12 =D11-012 14 Less: Fixed administrative expenses 550400 550400 15 Net profit =C13-C14 =D13-D14 13