Estimated Income Statements, using Absorption and VariableCosting
Prior to the first month of operations ending October 31Marshall Inc. estimated the following operating results:
| Sales (24,800 x $86) | $2,132,800 | |
| Manufacturing costs (24,800 units): | |
| Direct materials | 1,282,160 | |
| Direct labor | 302,560 | |
| Variable factory overhead | 141,360 | |
| Fixed factory overhead | 168,640 | |
| Fixed selling and administrative expenses | 45,900 | |
| Variable selling and administrative expenses | 55,500 | |
The company is evaluating a proposal to manufacture 27,200 unitsinstead of 24,800 units, thus creating an Inventory, October 31 of2,400 units. Manufacturing the additional units will not changesales, unit variable factory overhead costs, total fixed factoryoverhead cost, or total selling and administrative expenses.
a. 1. Prepare an estimated income statement,comparing operating results if 24,800 and 27,200 units aremanufactured in the absorption costing format. If an amount boxdoes not require an entry leave it blank or enter “0”.
| Marshall Inc. |
| Absorption Costing Income Statement |
| For the Month Ending October 31 |
| 24,800 Units Manufactured | 27,200 Units Manufactured |
| Sales | $ | $ |
| Cost of goods sold: | | |
| Cost of goods manufactured | $ | $ |
| Inventory, October 31 | | |
| Total cost of goods sold | $ | $ |
| Gross profit | $ | $ |
| Selling and administrative expenses | | |
| Income from operations | $ | $ |
a. 2. Prepare an estimated income statement,comparing operating results if 24,800 and 27,200 units aremanufactured in the variable costing format. If an amount box doesnot require an entry leave it blank or enter “0”.
| Marshall Inc. |
| Variable Costing Income Statement |
| For the Month Ending October 31 |
| 24,800 Units Manufactured | 27,200 Units Manufactured |
| Sales | $ | $ |
| Variable cost of goods sold: | | |
| Variable cost of goods manufactured | $ | $ |
| Inventory, October 31 | | |
| Total variable cost of goods sold | $ | $ |
| Manufacturing margin | $ | $ |
| Variable selling and administrative expenses | | |
| Contribution margin | $ | $ |
| Fixed costs: | | |
| Fixed factory overhead | $ | $ |
| Fixed selling and administrative expenses | | |
| Total fixed costs | $ | $ |
| Income from operations | $ | $ |
