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Answer:
Z-Var Corporation
1a. Income Statements (using variable costing)
2016 2017
Sales revenue $2,700,000 $2,700,000
Variable costs 0 0
Contribution margin $2,700,000 $2,700,000
Costs (all fixed):
Manufacturing $2,580,000 $2,580,000
Operating (nonmanufacturing) $102,000 $102,000
Total fixed costs $2,682,000 $2,682,000
Net income $18,000 $18,000
1b. Income Statements (using absorption costing)
2016 2017
Sales revenue $2,700,000 $2,700,000
Costs (all fixed):
Manufacturing $2,580,000 $2,580,000
Gross profit $120,000 $120,000
Operating (nonmanufacturing) $102,000 $102,000
Net income $18,000 $18,000
3. Inventory costs in the Balance Sheets of December 31, 2016 and 2017:
a. Variable costing = $0 for both years
b. Absorption costing = $1,290,000 ($2,580,000 * 30,000/60,000) for 2016 and $0 for 2017.
4. There is no difference because there are no variable costs.
Explanation:
a) Data and Calculations:
2016 2017
Sales 30,000 tons 30,000 tons
Production 60,000 tons 0 tons
Selling price $90 per ton $90 per ton
Costs (all fixed):
Manufacturing $2,580,000 $2,580,000
Operating (nonmanufacturing) $102,000 $102,000
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