Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells20,000 tons of its granular. Because of this year's mild winter, projected demand for its product is only 15,000 tons. Based onprojected production and sales of 15,000 tons, the company estimates the following income using absorption costing.Sales (15,000 tons at $80 per ton)Cost of goods sold (15,000 tons at $60 per ton)Gross profitSelling and administrative expensesIncomeIts product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensiveequipment.Direct materials.Direct laborVariable overheadFixed overhead ($600,000/15,000 tons)Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling andadministrative expenses of $210,000 per year. The company's president will not earn a bonus unless a positive income is reported.The controller mentions that because the company has large storage capacity, it can report a positive income by setting production atthe usual 20,000 ton level even though it expects to sell only 15,000 tons. The president is surprised that the company can reportincome by producing more without increasing sales.Required:1. Prepare an income statement using absorption costing based on production of 20,000 tons and sales of 15,000 tons. Can thecompany report a positive income by increasing production to 20,000 tons and storing the 5,000 tons of excess production ininventory?2. By how much does income increase by when producing 20,000 tons and storing 5,000 tons in inventory compared to onlyproducing 15,000 tons?Complete this question by entering your answers in the tabs below.Required 1 Required 2$ 13 per ton$ 4 per ton$3 per ton$ 40 per tonBLAZER CHEMICALIncome Statement (Absorption Costing)Prepare an income statement using absorption costing based on production of 20,000 tons and sales of 15,000 tons. Can thecompany report a positive income by increasing production to 20,000 tons and storing the 5,000 tons of excess production ininventory?Did the company report a positive income?$ 1,200,000900,000300,000300,000$< Required 100Required 2 > Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells20,000 tons of its granular. Because of this year's mild winter, projected demand for its product is only 15,000 tons. Based onprojected production and sales of 15,000 tons, the company estimates the following income using absorption costing.Sales (15,000 tons at $80 per ton)Cost of goods sold (15,000 tons at $60 per ton)Gross profitSelling and administrative expensesIncomeIts product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensiveequipment.Direct materials.Direct laborVariable overheadFixed overhead ($600,000/15,000 tons)$ 13 per ton$ 4 per ton$3 per ton$ 40 per tonSelling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling andadministrative expenses of $210,000 per year. The company's president will not earn a bonus unless a positive income is reported.The controller mentions that because the company has large storage capacity, it can report a positive income by setting production atthe usual 20,000 ton level even though it expects to sell only 15,000 tons. The president is surprised that the company can reportincome by producing more without increasing sales.$ 1,200,000900,000300,000300,000Required:1. Prepare an income statement using absorption costing based on production of 20,000 tons and sales of 15,000 tons. Can thecompany report a positive income by increasing production to 20,000 tons and storing the 5,000 tons of excess production ininventory?2. By how much does income increase by when producing 20,000 tons and storing 5,000 tons in inventory compared to onlyproducing 15,000 tons?Complete this question by entering your answers in the tabs below.Required 1 Required 2< Required 1By how much does income increase by when producing 20,000 tons and storing 5,000 tons in inventory compared to onlyproducing 15,000 tons?Increase in incomeRequired 2 >

Required: 1. Prepare an income statement using absorption costing based on production of 20,000 tons and sales of 15,000 tons. Can the company report a positive income by increasing production to 20,000 tons and storing the 5,000 tons of excess production in inventory? 2. By how much does income increase by when producing 20,000 tons and storing 5,000 tons in inventory compared to only producing 15,000 tons?

Required: 1. Prepare an income statement using absorption costing based on production of 20,000 tons and sales of 15,000 tons. Can the company report a positive income by increasing production to 20,000 tons and storing the 5,000 tons of excess production in inventory? 2. By how much does income increase by when producing 20,000 tons and storing 5,000 tons in inventory compared to only producing 15,000 tons?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...

See similar textbooks

Similar questions

Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs. Wood used to produce desks ($125,00 per desk) Production labor used to produce desks ($15 per hour) Production supervisor salary ($45,000 per year) Depreciation on factory equipment ($60,000 per year) Selling and administrative expenses ($45,000 per year) Rent on corporate office ($44,000 per year) Nails, glue, and other materials required to produce desks (varies per desk) Utilities expenses for production facility Sales staff commission (5% of gross sales)
Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farm assuming it purchases the new equipment. Assume sales level remains unchanged.
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
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…
Blazer Chemical produces and sells an Ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 19,000 tons of its granular. Because of this year's mild winter, projected demand for its product is only 15,200 tons. Based on projected production and sales of 15,200 tons, the company estimates the following income using absorption costing. Sales (15,200 tons at $80 per ton) Cost of goods sold (15,288 tons at $60 per ton) Gross profit Selling and administrative expenses) Incone $ 1,216,000 912,000 304,000 384,000 $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 $13 per ton $ 4 per ton Fixed overhead ($608,000/15,200 tons). $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 $212,800 per year.…
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…
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…
Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells 20,000 tons of its granular. Because of this year’s mild winter, projected demand for its product is only 15,000 tons. Based on projected production and sales of 15,000 tons, the company estimates the following income using absorption costing. Sales (15,000 tons at $80 per ton) $ 1,200,000 Cost of goods sold (15,000 tons at $60 per ton) 900,000 Gross profit 300,000 Selling and administrative expenses 300,000 Income $ 0 Its product cost per ton follows and consists mainly of fixed overhead because its automated production process uses expensive equipment. Direct materials $ 13 per ton Direct labor $ 4 per ton Variable overhead $ 3 per ton Fixed overhead ($600,000/15,000 tons) $ 40 per ton Selling and administrative expenses consist of variable selling and administrative expenses of $6 per ton and fixed selling and administrative…
Campbell Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,900 6,400 4,100 9,600 26,600 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Campbell for $2.80 each. Required a. Calculate the total relevant cost. Should Campbell continue to make the containers? b. Campbell could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate the total avoidable costs. Should Campbell continue to make the containers? a. Total relevant cost Should Campbell continue to make the containers? b. Total avoidable cost Should Campbell continue to make the containers?
Vernon Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $5,700 6,500 3,200 8,400 27,100 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Vernon for $2.60 each. Required a. Calculate the total relevant cost. Should Vernon continue to make the containers? b. Vernon could lease the space it currently uses in the manufacturing process. If leasing would produce $12,700 per month, calculate the total avoidable costs. Should Vernon continue to make the containers? a. Total relevant cost a. Should Vernon continue to make the containers? b. Total avoidable cost b. Should Vernon continue to make the containers?
Finch Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,400 6,000 4,000 11,400 27,300 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Finch for $2.70 each. Required a. Calculate the total relevant cost. Should Finch continue to make the containers? b. Finch could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Finch continue to make the containers? a. Total relevant cost Should Finch continue to make the containers? b. Total avoidable cost Should Finch continue to make the containers?