Estimiale Inaore: Statements, using Abseption an:l Var able Costing Prior to the

Question

Estimiale Inaore: Statements, using Abseption an:l Var able Costing Prior to the first month of operations ending October 31 Marshal Inc. estimated the following operating results: Saes (12,80O x $45) Marnufacturing costs (12,800 unts): $576,DD Direct materials Diret lhor Veriable factory overhead 350,720 83,200 30,400 46,DB0 Fixed seling and administrative experises 12,5D0 Variable selling and administrative expenses 15,2010 The company is evaluating a proposal to manutacture 1,100 units instead of 12,600 units, thus creating an Inventory, October 31 of 1,600 units. Manufacturing the additional units wil not change sales, unit variable tactory overhead costs, total tixed factory overhead cost, or total seling and administrative expenses. a. 1 Prepare an estimated income statement, comparing a erating res sir 12 00 and 14,400 units are manufactured n the absor tion costri armat. Ir an·mount box does not req re an entry eave it blank af enter"0". Marshall Inc. Absorption Costing Income Statement For the Month E October 31 12,800 Unts Manufocturod 14,400 Unts Manufactunod 576,000 Sales Cost of goods sold: Cost of goods manufactured Inventory, October 31 Total cost of goods sold

Explanation / Answer

Income Statement Under Absorption Costing 12800 units 14400 units sales 576000 576000 Cost of Goods sold Cost of goods mnaufactured 518400 577440 Inventory Oct 31 0 64160 Total cost of goods sold 518400 513280 Gross profit 57600 62720 Selling and admin expense 25700 25700 Income from operations 31,900 37020 Note: Cost of Goods manufactured in case of 14400 units Material (350720*14400/12800) 394560 labour (83200*14400/12800) 93600 Variable OH (38400*14400/12800) 43200 Fixed OH 46080 Total cost 577440 Less: ending Inventory (577440/14400*1600) 64160 Income Statement under variable Costing 12800 14400 Sales 576000 576000 variable cost of goods sold variable cocst of goods mnaufactured 472320 531360 LesS: einding Inventory 0 59040 Total Variable cost of goods sold 472320 472320 manufacturing Margin 103680 103680 Variable Sselling and admin expense 15200 15200 Conribution margin 88480 88480 Fixed cost: Fixed manufcaturing OH 46080 46080 Fixed Selling Oh 12500 12500 Total fixed cost 58580 58580 net income 29900 29900 Note: Cost of Goods manufactured in case of 14400 units Material (350720*14400/12800) 394560 labour (83200*14400/12800) 93600 Variable OH (38400*14400/12800) 43200 Total cost 531360 Less: ending Inventory (531360/14400*1600) 59040

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