A Income statements under absorption costing and variable costing ristructions Labels and Amount Descriptions Absorption Costing Income Statement Variable Costing Income Statement Final Questions Instructions The demand for solvent, one of numerous products manufactured by RZM Industries Inc, has dropped sharply because of recent competition from a similar product. The company's chemists are currently completing tests of various new formulas, and als anticipated that the manufacture of a superior product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed The controller has been asked by the president of the company for advice on whether to continue production during May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data: RZM Industries Inc Income Statement-Solvent For the Month Ended April 30 1 Sales 14,000 units) $500,000.00 424,000.00 Cost of goods sold 1 Gross profit $76,000.00 + Selling and administrative expenses 102,000.00 RZM Industries Inc income Statement Solvent For the Month Ended April 30 1 Salo (4.000 units Cost of goods sold 5500 000.00 424,000.00 Genssit Selling and administrative expenses Loss from operations $76,000.00 103,000.00 $26.000,00) The production costs and selling and administrative expenses based on production of 4,000 units in April, are as follows: Direct materials Direct labor $45 per unit 20 per unit 16 per unit Variable manufacturing cost Variable selling and administrative expenses Fixed manufacturing cost Fixed saling and administrative expenses 15 per unit 5100.000 for April 42 000 for Apri Sales for May are expected to drop about 20% below those of the preceding month No significant changes are anticipated in the fixed costs of variable costs per unt. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent. The Inventory of solvent at the beginning and end of May is expected to be inconsequential eBook Sales for May are expected to drop about 20% below those of the preceding month. No significant changes are anticipated in the fixed costs ar variable costs per unit. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent The nventory of solvent at the beginning and end of May is expected to be inconsequential Required: 1. Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month Round amounts to two decimals. 2. Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month Round amounts to ho decimals. 3. What would be the estimated loss in income from operations the solvent production were temporarily suspended for May? We loss is incurred, enter that amount as a negative number using a minus sign 4. What advice should the controller give to management? *Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for next ontnes. Be sure to complete the statement heading. A colon () ww automatically appear if it is required. Il a net loss is curred enter that amount as a negative number using amus sign Labels and Amount Descriptions Labels Cast at goods sold Food costs For the Month Ending May 31 May 31 Labels and Amount Descriptions Labels Cost of goods sold Fixed costs For the Month Ending May 31 May 31 Selling and administrative expenses Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Direct labor Direct materials Fixed manufacturing cost Fixed selling and administrative expenses Gross profit Income from operations Loss from operations Manufacturing margin Planned contribution margin Sales Sales mix eBook Planned contribution margin Sales Sales mix Total cost of goods sold Totalfixed costs Total seling and administrative experises Total variable cost of goods sold Variable manufacturing cost Variable selling and administrative expenses Absorption Costing Income Statement 7. Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month Round amounts to two decimals Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading A colon () w automatically appear if it is required Ifa net loss is incurred, enter that amount as a negative number using e minus sign RZM Industries Inc Estimated Income Statement-Absorption Costing-Solvent (Label) 1 RZM Industries Inc. Estimated Income Statement-Absorption Costing-Solvent (Label) 1 2 (Label) 3 4 5 6 7 8 9 (Label) 10 11 12 13 Variable Costing Income Statement Variable Costing Income Statement 2. Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month Round amounts to two decimals. Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () wautomatically appear if it is required a net loss is incurred, enter that amount as a negative number using a minus sign RZM Industries Inc Estimated Income Statement Variable Casting Solvent (Label) 1 Label I 1 5 7 10 (Label) 11 RZM Industries Inc. Estimated Income StatementVariable Costing-Solvent (Label) 1 2 (Label) 3 5 5 6 7 8 9 10 (Label) 11 12 13 14 15 14 Final Questions 3 What would be the estimated loss in income from operations if the solvent production were temporanily suspended for May? If a loss is incurred, enter that amount as a negative number using a minus sign 4 What advice should the controller give to management? Production of solvent should be Temporary suspension of production would result in an operating loss of production is continued. The result would be a savings of compared with an operating loss of