Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help thank you! Blazer Chemical produces and sells an icemelting granular used on roadways and sidewalks in winter. It annually produces and sells about

Please help thank you!

image text in transcribedimage text in transcribed
Blazer Chemical produces and sells an icemelting granular used on roadways and sidewalks in winter. It annually produces and sells about 100 tons of its granular. In its nineyear history, the company has never reported a net loss. However, because of this year's unusually mild winter, projected demand for its product is only 70 tons. Based on its predicted production and sales of 70 tons, the company projects the following income statement (under absorption costing). Sales (78 tons at $28,588 per ton) $1,435,888 Cost of goods sold (78 tons at $15,588 per ton) 1,885,888 Gross margin 358,888 Selling and administrative expenses 371,788 Net loss $ (21,788) 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 $ 5,214 Fixed cost per ton ($728,888 + 78 tons) 18,286 Total product cost per ton $15,588 Selling and administrative expenses consist of variable selling and administrative expenses of $310 per ton and fixed selling and administrative expenses of $350,000 per year. The company's president is concerned about the adverse reaction from its creditors and shareholders ifthe projected net loss is reported. The operations manager mentions that since the company has large storage capacity, it can report a net income by keeping its production at the usual 100ton level even though it expects to sell only 70 tons. The president is puzzled by the suggestion that the company can report income by producing more without increasing sales. Required: 1. Can the company report a net income by increasing production to 100 tons and storing the excess production in inventory? Complete the following income statement (using absorption costing} based on production of100 tons and sales of 70 tons. [Round your answers to the nearest whole dollar.) Cost of goods sold per unit Number of tons sold Total oost of goods sold

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analytical Corporate Valuation Fundamental Analysis, Asset Pricing, And Company Valuation

Authors: Pasquale De Luca

1st Edition

331993550X, 9783319935508

More Books

Students also viewed these Accounting questions