Reference no: EM133019933

Question - AFN Company produces plastic that is used for injection-moulding application such as gears for small motors. In 2020, the first year of operations, AFN Company produced 4000 tonnes of plastic and sold 3500 tonnes. In 2021, the production and sales results were exactly reversed. In each year the selling price per tonne was 2000: variable manufacturing cost were 15% of the sale price for the unit produced: Variable selling expenses were 10% of the selling price of the units sold: Fixed manufacturing costs were $2.8 million; and fixed administrative expenses were $500,000.

Required -

A) Prepare comparative income statement for each year using variable costing.

B) Prepare comparative income statements for each year using absorption costing.

C) Reconcile the differences in the income from operations each year under the two costing approaches.