Question

Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending April 30, 2016, Jadelis Industries Inc. estimated the following operating results:

Sales (24,000 x $83)	$1,992,000
Manufacturing costs (24,000 units):
Direct materials	1,204,800
Direct labor	285,600
Variable factory overhead	132,000
Fixed factory overhead	158,400
Fixed selling and administrative expenses	43,100
Variable selling and administrative expenses	52,100

The company is evaluating a proposal to manufacture 26,400 units instead of 24,000 units, thus creating an ending inventory of 2,400 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total fixed factory overhead cost, or total selling and administrative expenses.

1. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the absorption costing format.

Jadelis Industries Inc.
Absorption Costing Income Statement
For the Month Ending April 30, 2016
	24,000 Units Manufactured	26,400 Units Manufactured
Sales	$	$
Cost of goods sold:
Cost of goods manufactured	$	$
Less inventory, April 30		f
Cost of goods sold	$	$
Gross profit	$	$
Selling and administrative expenses
Income from operations	$	$

a. 2. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the variable costing format.

Jadelis Industries Inc.
Variable Costing Income Statement
For the Month Ending April 30, 2016
	24,000 Units Manufactured	26,400 Units Manufactured
Sales	$	$
Variable cost of goods sold:
Variable cost of goods manufactured	$	$
Less inventory, April 30
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	$	$

Answer 1

Income Statement A- Absorption Costing - Jadellis Industirres
Unti Manufactured	24000	26400
Sales	$1,992,000.00	$1,992,000.00
Less: Cost of Goods Sold
Beginning Inventory (a)	$0.00	$0.00
Variable manufacturing cost (b)	$1,622,400.00	$1,784,640.00
Fixed manufacturing Cost ©	$158,400.00	$158,400.00
Cost of Goods Manufactured (d=a+b+c)	$1,780,800.00	$1,943,040.00
Less: Ending Inventory (e ) (1943040/26400)*(26400-24000)	$0.00	$176,640.00
Cost of goods Sold (f=d-e)	$1,780,800.00	$1,766,400.00
Gross Magin (sales -cost of Goods Sold)	$211,200.00	$225,600.00
Less: Selling & Admin Expense
Variable Cost of S&A Expense	$52,100.00	$52,100.00
Fixed Cost of &A Expense	$43,100.00	$43,100.00
Net Operating Income	$116,000.00	$130,400.00
Income Statement As per - Variable Costing -Jadellis Industris
Unti Manufactured	24000	26400
Sales    (Y)	$1,992,000.00	$1,992,000.00
Less: Variable Cost of Goods Sold
Beginning Inventory (a)	$0.00	$0.00
Variable manufacturing cost (b)	$1,622,400.00	$1,784,640.00
Cost of Goods Manufactured (d=a+b)	$1,622,400.00	$1,784,640.00
Less: Ending Inventory (e ) (1784640/26400)*(26400-24000)		$162,240.00
Variable Cost of goods Sold (f=d-e)	$1,622,400.00	$1,622,400.00
Manufacturing Margin(Y-f)	$369,600.00	$369,600.00
Less: Variable cost of Selling & Admin Expense	$52,100.00	$52,100.00
Contribution Amrgin	$317,500.00	$317,500.00
Less: Fixed Expense
Fixed Manufacturing Overhead	$158,400.00	$158,400.00
Fixed S&A Expense	$43,100.00	$43,100.00
Operating Income	$116,000.00	$116,000.00