Problem 6-7A (Part Level Submission)

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 5,400 tons of plastic and sold 4,725 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,300, variable manufacturing costs were 16% of the sales price of units produced, variable selling expenses were 8% of the selling price of units sold, fixed manufacturing costs were $3,618,000, and fixed administrative expenses were $500,000.

(c) 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 s Absorption costing net income