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 (27,200 x $96) Manufacturing costs (27,200 units): Direct materials $2,611,200 1,572,160 Direct labor 372,640 Variable factory overhead 174,080 Fixed factory overhead 206,720 Fixed selling and administrative expenses Variable selling and administrative expenses 56,200) 68,000 The company is evaluating a proposal to manufacture 30,400 units instead of 27,200 units, thus creating an ending inventory of 3,200 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 27,200 and 30,400 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Cost of goods sold: 1. Prepare an estimated income statement, comparing operating results if 27,200 and 30,400 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 State pent For the Month Ending October 31 27,200 Units Manufactured 30,400 Units Manufactured 1000000 0000000 a. 2. Prepare an estimated income statement, comparing operating results if 27,200 and 30,400 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 Variable cost of goods sold: Fixed costs: Total fixed costs 27,200 Units Manufactured 30,400 Units Manufactured 0000 000000 10000 000000 b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? overhead cost over al The increase in income from operations under absorption costing is caused by the allocation of The difference can also be explained by the amount of number of units. Thus, the cost of goods sold is included in the inventory overhead cost Next>>