Estimated Income Statements, using Absorption and Variable CostingPrior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:Sales (25,600 x $91)$2,329,600 Manufacturing costs (25,600 units): Direct materials1,400,320 Direct labor332,800 Variable factory overhead153,600 Fixed factory overhead184,320 Fixed selling and administrative expenses50,100 Variable selling and administrative expenses60,600 The company is evaluating a proposal to manufacture 28,800 units instead of 25,600 units, thus creating an ending inventory 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 25,600 and 28,800 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Cost of goods sold:Marshall Inc.Absorption Costing Income StatementFor the Month Ending October 3125,600 Units Manufactured 28,800 Units Manufactureda. 2. Prepare an estimated income statement, comparing operating results if 25,600 and 28,800 units are manufactured in the variable costing format. If an amount box does notrequire an entry leave it blank.Marshall Inc.Variable Costing Income StatementFor the Month Ending October 3125,600 Units Manufactured 28,800 Units ManufacturedVariable cost of goods sold:100000 Variable cost of goods sold:Fixed costs:Marshall Inc.Variable Costing Income StatementFor the Month Ending October 3125,600 Units ManufacturedTotal fixed costs$$$$28,800 Units Manufactured$b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement?overhead cost over aThe increase in income from operations under absorption costing is caused by the allocation ofThus, the cost of goods sold isinventory.The difference can also be explained by the amount ofoverhead cost included in thenumber of units.

To determine the product cost of a company two types of costing methods are used which are variable…

Answered: a. 1. Prepare an estimated income…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 (25,600 x $91)	$2,329,600
Manufacturing costs (25,600 units):
Direct materials	1,400,320
Direct labor	332,800
Variable factory overhead	153,600
Fixed factory overhead	184,320
Fixed selling and administrative expenses	50,100
Variable selling and administrative expenses	60,600

The company is evaluating a proposal to manufacture 28,800 units instead of 25,600 units, thus creating an ending inventory 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 25,600 and 28,800 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.