Ch 20 Part 2 The demand for solvent, one of numerous products manufactured by Mac n Cheese Industries Inc , has dropped sharply because of recent competition from a similar product The companys chemists are currently completing tests of various new formulas, and it is 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 The production costs and selling and administrative expenses, based on production of 4,000 units in April, are as follows Sales for May are expected to drop about 20 below those of the preceding month No significant changes are anticipated in the fixed costs or variable costs per unit 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 Labels Fixed costs For the Month Ending May 31, 2016 May 31, 2016 Selling and administrative expenses Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Cost of goods sold 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 Variable manufacturing cost Variable selling and administrative expenses 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 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 ( ) will automatically appear if it is required If a net loss is incurred, enter that amount as a negative number using a minus sign Mac n' Cheese Industries Inc Income Statement Solvent For the Month Ended April 30, 2016 1 Sales (4,000 units 2 Cost of goods sold 3 Gross proft 4 Selling and administrative expenses $500,000 00 424,000 00 $76,000 00 102,000 00 (26,000 00) Mac n' Cheese Industries Inc Income Statement Solvent For the Month Ended April 30, 2016 1 Sales (4,000 units 2 Cost of goods sold 3 Gross proft 4 Selling and administrative expenses $500,000 00 424,000 00 $76,000 00 102,000 00 (26,000 00)

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Ch 20 Part 2 The demand for solvent, one of numerous products manufactured by Mac n Cheese Industries Inc., has dropped sharply because of recent

Ch 20 Part 2

The demand for solvent, one of numerous products manufactured by Mac n Cheese Industries Inc., has dropped sharply because of recent competition from a similar product. The companys chemists are currently completing tests of various new formulas, and it is 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:

image text in transcribed

The production costs and selling and administrative expenses, based on production of 4,000 units in April, are as follows:

image text in transcribed Sales for May are expected to drop about 20% below those of the preceding month. No significant changes are anticipated in the fixed costs or variable costs per unit. 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. image text in transcribed

Labels
Fixed costs
For the Month Ending May 31, 2016
May 31, 2016
Selling and administrative expenses
Variable cost of goods sold
Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods sold
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
Variable manufacturing cost
Variable selling and administrative expenses 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 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 (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Mac n' Cheese Industries Inc. Income Statement-Solvent For the Month Ended April 30, 2016 1 Sales (4,000 units 2 Cost of goods sold 3 Gross proft 4 Selling and administrative expenses $500,000.00 424,000.00 $76,000.00 102,000.00 (26,000.00) Mac n' Cheese Industries Inc. Income Statement-Solvent For the Month Ended April 30, 2016 1 Sales (4,000 units 2 Cost of goods sold 3 Gross proft 4 Selling and administrative expenses $500,000.00 424,000.00 $76,000.00 102,000.00 (26,000.00)