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 (25,600 x $91) $2,329,600 Manufacturing costs (25,600 units): Direct materials 1,400,320 Direct labor 332,800 Variable factory overhead 153,600 Fixed factory overhead 184,320 Fixed selling and administrative expenses 50,100 Variable selling and administrative expenses 60,600 The company is evaluating a proposal to manufacture 28,800 units instead of 25,600 units, thus creating an ending Inventory of 3,200 units. Manufacturing the additional units will not change sales, unit variable factory overhead costs, total foxed factory overhead cost, or total selling and administrative expenses. a. 1. Prepare an estimated Income statement, comparing operating results ir 25,600 and 28,000 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 25,600 Units Manufactured 28,800 Units Manufactured Cost of goods sold a. 2. Prepare an estimated income statement, comparing operating results f 25,600 and 28,800 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 25,600 Units Manufactured 20,000 Units Manufactured Variable cost of goods sold: od costs Total fixed cost QUI 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 is 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 The difference can also be explained by the amount of overhead cost included in the Inventory