# Variable Costing Income Statement AnalysisThis educational content provides an analysis of the variable costing income statement for Marshall Inc. for the month ending October 31. The analysis compares operating results for manufacturing 40,000 units and 50,000 units.## Marshall Inc. Variable Costing Income Statement### For the Month Ending October 31| Description | 40,000 Units Manufactured | 50,000 Units Manufactured ||-----------------------------------------------|---------------------------|---------------------------|| **Sales** | $3,600,000 | || **Variable Cost of Goods Sold** | | || - Variable Cost of Goods Manufactured | $2,160,000 | $2,700,000 || - Inventory, October 31 | | $540,000 || **Total Variable Cost of Goods Sold** | $2,160,000 | || **Manufacturing Margin** | $1,440,000 | || **Variable Selling and Administrative Expenses| $200,000 | || **Contribution Margin** | $1,240,000 | || **Fixed Costs:** | | || - Fixed Factory Overhead | $120,000 | $120,000 |### Explanation- **Sales**: Represents the revenue generated from selling 40,000 units. For 50,000 units, the sales figure is not provided.- **Variable Cost of Goods Manufactured**: The cost incurred to manufacture goods which varies with production level. It is $2,160,000 for 40,000 units and $2,700,000 for 50,000 units.- **Inventory, October 31**: The value of goods left in inventory at the end of the period for 50,000 units is $540,000, while it is not applicable for 40,000 units.- **Total Variable Cost of Goods Sold**: Total variable cost for 40,000 units amounts to $2,160,000.- **Manufacturing Margin**: Represents the difference between sales and variable cost of goods sold for 40,000 units, which totals $1,440,000.- **Variable Selling and Administrative Expenses**: These expenses amount to $200,000 for 40,000 units.- **Contribution Margin**: Calculated by subtracting variable **Estimated Income Statements: Absorption and Variable Costing**Before commencing operations for the first month ending October 31, Marshall Inc. projected the following operating outcomes:- **Sales (40,000 x $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:** $200,000Marshall Inc. is considering the production of 50,000 units instead of 40,000 units, resulting in an inventory of 10,000 units. This change would not affect sales, unit variable factory overhead costs, total fixed factory overhead, or total selling and administrative expenses.**Task:** Prepare an estimated income statement comparing results for 40,000 and 50,000 units using absorption costing. Leave non-applicable entry fields blank.---**Marshall Inc. Absorption Costing Income Statement For the Month Ending October 31**| | 40,000 Units Manufactured | 50,000 Units Manufactured ||------------------------|---------------------------|---------------------------|| **Sales** | $3,600,000 | $3,600,000 || **Cost of Goods Sold:**| | || Cost of goods manufactured | $2,280,000 | $2,820,000 || Inventory, October 31 | $0 | $564,000 || Total cost of goods sold | $2,280,000 | $2,256,000 || **Gross Profit** | $1,320,000 | $1,344,000 |*Note: The increase in units does not change sales or costs related to fixed expenses, highlighting absorption costing variability with production levels.*

Variable costing method :— Under this method of costing, product cost per unit is calculated by…

a. 2. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. 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: Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 40,000 Units Manufactured Fixed factory overhead ✓ 3,600,000 $ √ 2,160,000 $ √ 2,160,000 $ √ 1,440,000 200,000 $ √ 1,240,000 120,000 $X $ √ 2,700,000 540,000 $ X $ X 50,000 Units Manufactured X $ X 120,000

a. 2. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. 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: Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 40,000 Units Manufactured Fixed factory overhead ✓ 3,600,000 $ √ 2,160,000 $ √ 2,160,000 $ √ 1,440,000 200,000 $ √ 1,240,000 120,000 $X $ √ 2,700,000 540,000 $ X $ X 50,000 Units Manufactured X $ X 120,000

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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On November 30, the end of the first month of operations, Weatherford Company prepared the following income statement, based on the absorption costing concept: Weatherford Company Absorption Costing Income Statement For the Month Ended November 30 Sales (6,100 units) Cost of goods sold: Cost of goods manufactured (7,000 units) Inventory, November 30 (1,000 units) Total cost of goods sold Gross profit $161,000 Sales Variable cost of goods sold: Variable cost of goods manufactured Inventory, November 30 (23,000) $201,300 138,000 $63,300 Selling and administrative expenses 35,910 Income from operations $27,390 Assume the fixed manufacturing costs were $38,640 and the fixed selling and administrative expenses were $17,590 Prepare an income statement according to the variable costing concept. Round all final answers to whole dollars. Weatherford Company Variable Costing Income Statement For the Month Ended November 30 201,300
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Michie Company's management accountant prepared the following income statement relating to its second year of operations using the absorption costing format: Michie Company Income Statement (Absorption Costing) Year Ended December 31, Year 2 Sales Cost of goods sold: Beginning inventory Variable and fixed manufacturing costs Cost of goods available for sale Less ending inventory Total cost of goods sold Gross margin Less operating costs: Variable selling and administrative costs Fixed selling and administrative costs Net income (50,000 x $ 20.00) (10,000 $ 10.00*) (45,000 x $ 10.00*) (55,000 $10.00) (5,000 * $ 10.00) $ 1,000,000 $ 100,000 450,000 550,000 50,000 (500,000) $ 500,000 (50,000 x $ 2.00) $ 100,000 150,000 Variable manufacturing costs of $8.00 plus fixed manufacturing costs of $2.00. (250,000) $ 250,000
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Variable Costing Income Statement On April 30, the end of the first month of operations, Jopl Company prepared the following income statement, based on the absorption costing concept: Joplin Company Absorption Costing Income Statement For the Month Ended April 30 Sales (4,600 units) Cost of goods sold: Cost of goods manufactured (5,200 units) Inventory, April 30 (700 units) Total cost of goods sold Gross profit Selling and administrative expenses Operating income Joplin Company Variable Costing Income Statement For the Month Ended April 30 Variable cost of goods sold: If the fixed manufacturing costs were $29,484 and the fixed selling and administrative expenses were $12,590, prepare an income statement according to the variable costing concept. Round all final answers to whole dollars. 1:110 $109,200 (14,700) Fixed costs: $138,000 (94,500) $43,500 (25,700) $17,800
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