Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending January $31,$ Lemke Inc. estimated the following operating results:

Line Item Description Amount

Sales $(18,400\backslash$times $$63)$ $$1,159,200$

Manufacturing costs $(18,400$ units$)$:

Direct materials $699,200$

Direct labor $165,600$

Variable factory overhead $77,280$

Fixed factory overhead $92,000$

Fixed selling and administrative expenses $25,000$

Variable selling and administrative expenses $30,300$

The company is evaluating a proposal to manufacture $20,000$ units instead of $18,400$ units, thus creating an ending inventory of $1,600$ 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.

Question Content Area

a$.1.$ Prepare an estimated income statement, comparing operating results if $18,400$ and $20,000$ units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. a$.2.$ Prepare an estimated income statement, comparing operating results if $18,400$ and $20,000$ units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.