Question

In: Accounting

Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...

Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31 Marshall Inc. estimated the following operating results:

Sales (26,400 x $93) $2,455,200
Manufacturing costs (26,400 units):
Direct materials 1,483,680
Direct labor 351,120
Variable factory overhead 163,680
Fixed factory overhead 195,360
Fixed selling and administrative expenses 53,100
Variable selling and administrative expenses 64,300

The company is evaluating a proposal to manufacture 29,600 units instead of 26,400 units, thus creating an Inventory, October 31 of 3,200 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.

a. 1. Prepare an estimated income statement, comparing operating results if 26,400 and 29,600 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank or enter “0”.

Marshall Inc.
Absorption Costing Income Statement
For the Month Ending October 31
26,400 Units Manufactured 29,600 Units Manufactured
$ $
Cost of goods sold:
$ $
$ $
$ $
Income from operations $ $

a. 2. Prepare an estimated income statement, comparing operating results if 26,400 and 29,600 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank or enter “0”.

Marshall Inc.
Variable Costing Income Statement
For the Month Ending October 31
26,400 Units Manufactured 29,600 Units Manufactured
$ $
Variable cost of goods sold:
$ $
$ $
$ $
$ $
Fixed costs:
$ $
Total fixed costs $ $
$ $

b. What is the reason for the difference in income from operations reported for the two levels of production by the absorption costing income statement?

The increase in income from operations under absorption costing is caused by the allocation of   overhead cost over a   number of units. Thus, the cost of goods sold is  . The difference can also be explained by the amount of   overhead cost included in the   inventory.

Solutions

Expert Solution

Answer with working given below:

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (40,000 × $90) $3,600,000 Manufacturing costs (40,000 units): Direct materials 1,440,000 Direct labor 480,000 Variable factory overhead 240,000 Fixed factory overhead 120,000 Fixed selling and administrative expenses 75,000 Variable selling and administrative expenses 200,000 The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (12,800 x $45) $576,000 Manufacturing costs (12,800 units): Direct materials 350,720 Direct labor 83,200 Variable factory overhead 38,400 Fixed factory overhead 46,080 Fixed selling and administrative expenses 12,500 Variable selling and administrative expenses 15,200 The company is evaluating a proposal to manufacture 14,400 units instead of 12,800 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (27,200 x $96) $2,611,200 Manufacturing costs (27,200 units): Direct materials 1,572,160 Direct labor 372,640 Variable factory overhead 174,080 Fixed factory overhead 206,720 Fixed selling and administrative expenses 56,200 Variable selling and administrative expenses 68,000 The company is evaluating a proposal to manufacture 30,400 units instead of 27,200 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (22,400 x $78) $1,747,200 Manufacturing costs (22,400 units): Direct materials 1,055,040 Direct labor 250,880 Variable factory overhead 116,480 Fixed factory overhead 138,880 Fixed selling and administrative expenses 37,800 Variable selling and administrative expenses 45,700 The company is evaluating a proposal to manufacture 24,800 units instead of 22,400 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (28,000 x $98) $2,744,000 Manufacturing costs (28,000 units): Direct materials 1,660,400 Direct labor 392,000 Variable factory overhead 184,800 Fixed factory overhead 218,400 Fixed selling and administrative expenses 59,400 Variable selling and administrative expenses 71,900 The company is evaluating a proposal to manufacture 31,200 units instead of 28,000 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
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...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (27,200 x $96) $2,611,200 Manufacturing costs (27,200 units): Direct materials 1,572,160 Direct labor 372,640 Variable factory overhead 174,080 Fixed factory overhead 206,720 Fixed selling and administrative expenses 56,200 Variable selling and administrative expenses 68,000 The company is evaluating a proposal to manufacture 30,400 units instead of 27,200 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (16,800 x $58) $974,400 Manufacturing costs (16,800 units): Direct materials 588,000 Direct labor 139,440 Variable factory overhead 65,520 Fixed factory overhead 77,280 Fixed selling and administrative expenses 21,000 Variable selling and administrative expenses 25,400 The company is evaluating a proposal to manufacture 18,400 units instead of 16,800 units, thus creating an ending inventory of...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31 Marshall 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 units instead of 24,800 units, thus creating an Inventory, October 31...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending...
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending October 31 Marshall Inc. estimated the following operating results: Sales (19,200 x $68) $1,305,600 Manufacturing costs (19,200 units): Direct materials 787,200 Direct labor 186,240 Variable factory overhead 86,400 Fixed factory overhead 103,680 Fixed selling and administrative expenses 28,200 Variable selling and administrative expenses 34,100 The company is evaluating a proposal to manufacture 21,600 units instead of 19,200 units, thus creating an Inventory, October 31...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT