Rock Crusher Corp. produces two grades of sand, A100 and A300, used in the manufacture of industrial abrasives. The results of operations last year were as follows:

Fixed production costs were $100,000 and fixed selling and administrative costs were $60,000. The company held no beginning inventories.

REQUIRED
Prepare a spreadsheet that can be used to answer all of the following questions.
A. If Rock Crusher uses a variable costing system, what was the operating income?
B. If Rock Crusher uses absorption costing and allocates actual fixed production costs to inventory on the basis of actual tons produced, what was the operating income?
C. Reconcile and explain the difference between your answers to parts (A) and(B).

Transcribed Image Text:

Production Sales Revenue Variable production costs Variable selling costs A100 4,000 tons 3,000 tons $90,000 $20,000 $15,000 A300 6,000 tons 4,000 tons $150,000 $15,000 $20,000 Total 10,000 tons 7,000 tons $240,000 $35,000 $35,000