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 (20,000 x $71) $1,420,000 Manufacturing costs (20,000 units): Direct materials 852,000 Direct labor 202,000 Variable factory overhead 94,000 Fixed factory overhead 112,000 Fixed selling and administrative expenses 30,500 Variable selling and administrative expenses 36,800 The company is evaluating a proposal to manufacture 22,400 units instead of 20,000 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. a. 1. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Absorption Costing Income Statement For the Month Ending October 31 20,000 Units Manufactured 22,400 Units Manufactured $fill in the blank e55edefdb03c07a_2 $fill in the blank e55edefdb03c07a_3 Cost of goods sold: $fill in the blank e55edefdb03c07a_5 $fill in the blank e55edefdb03c07a_6 fill in the blank e55edefdb03c07a_8 fill in the blank e55edefdb03c07a_9 $fill in the blank e55edefdb03c07a_11 $fill in the blank e55edefdb03c07a_12 $fill in the blank e55edefdb03c07a_14 $fill in the blank e55edefdb03c07a_15 fill in the blank e55edefdb03c07a_17 fill in the blank e55edefdb03c07a_18 $fill in the blank e55edefdb03c07a_20 $fill in the blank e55edefdb03c07a_21 a. 2. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 20,000 Units Manufactured 22,400 Units Manufactured $fill in the blank f7c34b014000fd5_2 $fill in the blank f7c34b014000fd5_3 Variable cost of goods sold: $fill in the blank f7c34b014000fd5_5 $fill in the blank f7c34b014000fd5_6 fill in the blank f7c34b014000fd5_8 fill in the blank f7c34b014000fd5_9 $fill in the blank f7c34b014000fd5_11 $fill in the blank f7c34b014000fd5_12 $fill in the blank f7c34b014000fd5_14 $fill in the blank f7c34b014000fd5_15 fill in the blank f7c34b014000fd5_17 fill in the blank f7c34b014000fd5_18 $fill in the blank f7c34b014000fd5_20 $fill in the blank f7c34b014000fd5_21 Fixed costs: $fill in the blank f7c34b014000fd5_23 $fill in the blank f7c34b014000fd5_24 fill in the blank f7c34b014000fd5_26 fill in the blank f7c34b014000fd5_27 Total fixed costs $fill in the blank f7c34b014000fd5_28 $fill in the blank f7c34b014000fd5_29 $fill in the blank f7c34b014000fd5_31 $fill in the blank f7c34b014000fd5_32 b. What is the reason for the difference in operating income 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

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 (20,000 x $71) $1,420,000 Manufacturing costs (20,000 units): Direct materials 852,000 Direct labor 202,000 Variable factory overhead 94,000 Fixed factory overhead 112,000 Fixed selling and administrative expenses 30,500 Variable selling and administrative expenses 36,800 The company is evaluating a proposal to manufacture 22,400 units instead of 20,000 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. a. 1. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Absorption Costing Income Statement For the Month Ending October 31 20,000 Units Manufactured 22,400 Units Manufactured $fill in the blank e55edefdb03c07a_2 $fill in the blank e55edefdb03c07a_3 Cost of goods sold: $fill in the blank e55edefdb03c07a_5 $fill in the blank e55edefdb03c07a_6 fill in the blank e55edefdb03c07a_8 fill in the blank e55edefdb03c07a_9 $fill in the blank e55edefdb03c07a_11 $fill in the blank e55edefdb03c07a_12 $fill in the blank e55edefdb03c07a_14 $fill in the blank e55edefdb03c07a_15 fill in the blank e55edefdb03c07a_17 fill in the blank e55edefdb03c07a_18 $fill in the blank e55edefdb03c07a_20 $fill in the blank e55edefdb03c07a_21 a. 2. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 20,000 Units Manufactured 22,400 Units Manufactured $fill in the blank f7c34b014000fd5_2 $fill in the blank f7c34b014000fd5_3 Variable cost of goods sold: $fill in the blank f7c34b014000fd5_5 $fill in the blank f7c34b014000fd5_6 fill in the blank f7c34b014000fd5_8 fill in the blank f7c34b014000fd5_9 $fill in the blank f7c34b014000fd5_11 $fill in the blank f7c34b014000fd5_12 $fill in the blank f7c34b014000fd5_14 $fill in the blank f7c34b014000fd5_15 fill in the blank f7c34b014000fd5_17 fill in the blank f7c34b014000fd5_18 $fill in the blank f7c34b014000fd5_20 $fill in the blank f7c34b014000fd5_21 Fixed costs: $fill in the blank f7c34b014000fd5_23 $fill in the blank f7c34b014000fd5_24 fill in the blank f7c34b014000fd5_26 fill in the blank f7c34b014000fd5_27 Total fixed costs $fill in the blank f7c34b014000fd5_28 $fill in the blank f7c34b014000fd5_29 $fill in the blank f7c34b014000fd5_31 $fill in the blank f7c34b014000fd5_32 b. What is the reason for the difference in operating income 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

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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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 (20,000 x $71)	$1,420,000
Manufacturing costs (20,000 units):
Direct materials	852,000
Direct labor	202,000
Variable factory overhead	94,000
Fixed factory overhead	112,000
Fixed selling and administrative expenses	30,500
Variable selling and administrative expenses	36,800

The company is evaluating a proposal to manufacture 22,400 units instead of 20,000 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.

a. 1. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

Marshall Inc.
Absorption Costing Income Statement
For the Month Ending October 31
	20,000 Units Manufactured	22,400 Units Manufactured
	$fill in the blank e55edefdb03c07a_2	$fill in the blank e55edefdb03c07a_3
Cost of goods sold:
	$fill in the blank e55edefdb03c07a_5	$fill in the blank e55edefdb03c07a_6
	fill in the blank e55edefdb03c07a_8	fill in the blank e55edefdb03c07a_9
	$fill in the blank e55edefdb03c07a_11	$fill in the blank e55edefdb03c07a_12
	$fill in the blank e55edefdb03c07a_14	$fill in the blank e55edefdb03c07a_15
	fill in the blank e55edefdb03c07a_17	fill in the blank e55edefdb03c07a_18
	$fill in the blank e55edefdb03c07a_20	$fill in the blank e55edefdb03c07a_21

a. 2. Prepare an estimated income statement, comparing operating results if 20,000 and 22,400 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.

Marshall Inc.
Variable Costing Income Statement
For the Month Ending October 31
	20,000 Units Manufactured	22,400 Units Manufactured
	$fill in the blank f7c34b014000fd5_2	$fill in the blank f7c34b014000fd5_3
Variable cost of goods sold:
	$fill in the blank f7c34b014000fd5_5	$fill in the blank f7c34b014000fd5_6
	fill in the blank f7c34b014000fd5_8	fill in the blank f7c34b014000fd5_9
	$fill in the blank f7c34b014000fd5_11	$fill in the blank f7c34b014000fd5_12
	$fill in the blank f7c34b014000fd5_14	$fill in the blank f7c34b014000fd5_15
	fill in the blank f7c34b014000fd5_17	fill in the blank f7c34b014000fd5_18
	$fill in the blank f7c34b014000fd5_20	$fill in the blank f7c34b014000fd5_21
Fixed costs:
	$fill in the blank f7c34b014000fd5_23	$fill in the blank f7c34b014000fd5_24
	fill in the blank f7c34b014000fd5_26	fill in the blank f7c34b014000fd5_27
Total fixed costs	$fill in the blank f7c34b014000fd5_28	$fill in the blank f7c34b014000fd5_29
	$fill in the blank f7c34b014000fd5_31	$fill in the blank f7c34b014000fd5_32

b. What is the reason for the difference in operating income 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.

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