ch 21 pt 2
Varble conting Income Statement Final Questions Instructions The demand for solvent, one of numerous products manufactured by Logan Industries inc. has dropped sharply because of recent compromodach company's chemists are currently completing tests of various new forms and it is antiopared that the manufacture of a superior product can be started on tower one month in the future. No changer will be needed in the present production facilities to manufacture the new product became only the mixture of a various materias * be changed The controllor has been asked by the president of the company for advice on whether to contiene production during October or to wipend the manufacture of virtual November 1. The following data have been assembled: Logan Industries Inc Income Statement-Solvent For the Month Ended September 30 1 Sales (10,000 units Cost of goods sold 3 Gross profit 5800.000.00 (770.000.00 550,000.00 (100.000,00) 5(70,000.00 Selling and administrative expenses Operating loss Nax The production costs and selling and administrative expenses, based on production of 10.000 units in September, we as follows Previous Save and Submit Assignment for Grading The production costs and selling and administrative expenses, based on production of 10.000 unts in September, are as follows: Direct materials Direct labor Variable manufacturing Com Variable selling and administrative expenses Fixed manufacturing cost Fixed soling and administrative expenses $35 per unit 24 per unit 8 per unit 6 per unit $100,000 for September 40.000 for September Sales for October are expected to drop about 40% below those of September. No significant changes are anticipated in the food 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 October is not expected to be significant (material) Required: 1. Prepare an estimated Income statement in absorption costing form for October for solvent, assuming that production continues during the month 2. Prepare an estimated income statement in variable costing form for October for solvent, assuming that production continues during the month. 3. What would be the ostimated operating loss if the solvent production were temporarily suspended for October? Il a loss is incurred, enter that amount as a negative number using a minus sign 4. What advice should you give to management? "Be sure to complete the statement heading. Refer to the Ist of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon () will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1. Propare an estimated Income statement in absorption costing form for October fot solvent, assuming that production continues during the month. Be sure to completo en statement heading, Roter to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for best entries. A colon () will automatically appear if it is required. Entor amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Not loss should be negative Logan Industries Inc Estimated Income Statement-Absorption Costing-Solvent (Cabo 1 2 (Label) 3 5 7 . (Label) 10 11 12 0 2. Propare an estimated income statement in variable costing form for October for soment, assuming that production continues during the month. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for rent entries. A colon () will automaticaly appear it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example. Net oss should be negative Logan Industries Inc Estimated Income Statement -Variable Costing-Solvent ( 1 2 (Label) 1 4 . 10 (Label) 11 12 15 14 3. What would be the estimated operating loss it the solvent production were temporary suspended for October?a loss is incurred, enter that amount as a negative number using a minus sign What advice should you give to management Production of solvent should be compared with an Temporary suspension of production would result in an operating loss of of production is continued. The result would be a savings of operating loss of
