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Problem 19-5A Income reporting, absorption costing, and managerial ethics C1 P2 Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nine-year history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its prod uct is only 60 tons. Based on its predicted production and sales of 60 tons, the company projects the fol- lowing income statement (under absorption costing) Cost of goods sold (60 tons at $16,000 per ton) . .. .. . Gross margin Selling and administrative expenses . .. . 960,000 300,000 318,600 $ (18,600) Its product cost information follows and consists mainly of fixed cost because of its automated production process requiring expensive equipment Variable direct labor and material costs per ton.. . . . . . $3,500 Fixed cost per ton ($750,000 60 tons) . . . . . . . . . . . . . . . 12.500 Total product cost per ton .. . . . . . . . . . .. . . . . . . . .. . . . .$16,000 Selling and administrative expenses consist of variable selling and administrative expenses of $310 per ton and fixed selling and administrative expenses of $300,000 per year. The company's president is con- cerned about the adverse reaction from its creditors and shareholders if the projected net loss is reported The operations manager mentions that since the company has large storage capacity, it can report a net Problem 19-5A Income reporting, absorption costing, and managerial ethics C1 P2 Blazer Chemical produces and sells an ice-melting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nine-year history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its prod uct is only 60 tons. Based on its predicted production and sales of 60 tons, the company projects the fol- lowing income statement (under absorption costing) Cost of goods sold (60 tons at $16,000 per ton) . .. .. . Gross margin Selling and administrative expenses . .. . 960,000 300,000 318,600 $ (18,600) Its product cost information follows and consists mainly of fixed cost because of its automated production process requiring expensive equipment Variable direct labor and material costs per ton.. . . . . . $3,500 Fixed cost per ton ($750,000 60 tons) . . . . . . . . . . . . . . . 12.500 Total product cost per ton .. . . . . . . . . . .. . . . . . . . .. . . . .$16,000 Selling and administrative expenses consist of variable selling and administrative expenses of $310 per ton and fixed selling and administrative expenses of $300,000 per year. The company's president is con- cerned about the adverse reaction from its creditors and shareholders if the projected net loss is reported The operations manager mentions that since the company has large storage capacity, it can report a net
