Question 5 AFN Company produces plastic that is used for injection-moulding applications such as gears for small motors. In 2020, the first year of operations, AFN Company produced 4,100 tonnes of plastic and sold 2,911 tonnes. In 2021, the production and sales results were exactly reversed. In each year, the selling price per tonne was $2,200; variable manufacturing costs were 17% of the sales price for the units produced; variable selling expenses were 10% of the selling price of the units sold; fixed manufacturing costs were $2,911,000; and fixed administrative expenses were $504,300.

(a)

Prepare comparative income statements for each year using variable costing. (Use the format from Illustration 8.5.)

AFN COMPANY Income StatementVariable Costing December 31For the Months Ended December 31For the Years Ended December 31
		2020		2021
Number of units manufactured
Number of units sold
Fixed costsTotal fixed costsContribution marginNet incomeVariable costsTotal variable costsSales		$		$
AddLess : Net incomeTotal fixed costsContribution marginFixed costsSalesVariable costsTotal variable costs
Inventory, beginningCosts of goods manufacturedCost of goods available for saleFixed selling and administrative costsVariable cost of goods soldVariable selling and administrative costsInventory, ending
AddLess : Fixed selling and administrative costsVariable selling and administrative costsCost of goods available for saleCosts of goods manufacturedInventory, endingVariable cost of goods soldInventory, beginning
Variable cost of goods soldInventory, beginningInventory, endingCost of goods available for saleVariable selling and administrative costsCosts of goods manufacturedFixed selling and administrative costs
AddLess : Variable cost of goods soldInventory, beginningVariable selling and administrative costsInventory, endingFixed selling and administrative costsCost of goods available for saleCosts of goods manufactured
Variable selling and administrative costsFixed selling and administrative costsCost of goods available for saleInventory, endingCosts of goods manufacturedVariable cost of goods soldInventory, beginning
Fixed selling and administrative costsVariable selling and administrative costsVariable cost of goods soldCost of goods available for saleCosts of goods manufacturedInventory, endingInventory, beginning
Total fixed costsSalesContribution marginNet incomeFixed costsVariable costsTotal variable costs
Variable costsTotal fixed costsFixed costsTotal variable costsSalesContribution marginNet income
AddLess : SalesNet incomeContribution marginFixed costsVariable costsTotal variable costsTotal fixed costs
Net incomeContribution marginVariable costsFixed costsTotal fixed costsTotal variable costsSales		$		$