A. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. В. What is the reason for the difference in income from operations reported for the two levels of production by the absorption costing income statement?
A. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. В. What is the reason for the difference in income from operations reported for the two levels of production by the absorption costing income statement?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![EX 20-8 Estimated income statements, using absorption and variable costing Obj. 1, 2
e Prior to the first month of operations ending October 31, Marshall Inc. estimated the following
s, operating results:
00
Sales (40,000 x $90) .....
Manufacturing costs (40,000 units):
Direct materials..
Direct labor .....
Variable factory overhead .
Fixed factory overhead...
Fixed selling and administrative expenses.
Variable selling and administrative expenses..
s)
$3,600,000
1,440,000
480,000
DW
240,000
120,000
75,000
200,000
The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units,
thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units
are manufactured in (1) the absorption costing format and (2) the variable costing format.
В.
What is the reason for the difference in income from operations reported for the
two levels of production by the absorption costing income statement?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6111444d-4f61-4ac1-8c68-6b1cd45e8348%2F5603f849-bd4c-4c27-97db-3ab361dc3797%2Fxodblmq_processed.png&w=3840&q=75)
Transcribed Image Text:EX 20-8 Estimated income statements, using absorption and variable costing Obj. 1, 2
e Prior to the first month of operations ending October 31, Marshall Inc. estimated the following
s, operating results:
00
Sales (40,000 x $90) .....
Manufacturing costs (40,000 units):
Direct materials..
Direct labor .....
Variable factory overhead .
Fixed factory overhead...
Fixed selling and administrative expenses.
Variable selling and administrative expenses..
s)
$3,600,000
1,440,000
480,000
DW
240,000
120,000
75,000
200,000
The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units,
thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units
are manufactured in (1) the absorption costing format and (2) the variable costing format.
В.
What is the reason for the difference in income from operations reported for the
two levels of production by the absorption costing income statement?
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