Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 3,500 tons of plastic and sold 3,150 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,200, variable manufacturing costs were 18% of the sales price of units produced, variable selling expenses were 9% of the selling price of units sold, fixed manufacturing costs were $2,555,000, and fixed administrative expenses were $590,000.

Part 2

Prepare income statements for each year using absorption costing.

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JACKSON COMPANY Income Statement December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017 Absorption Costing
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Part 3

Reconcile the differences each year in net income under the two costing approaches.

		2016		2017
Variable costing net income		$		$
Fixed manufacturing overhead
expensed with variable costing		$		$
Less: Fixed manufacturing overhead
expensed with absorption costing
Difference
Absorption costing net income		$		$