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 $(28,800$ x $$101)$ $$2,908,800$

Manufacturing costs $(28,800$ units$)$:

Direct materials $1,751,040$

Direct labor $414,720$

Variable factory overhead $192,960$

Fixed factory overhead $230,400$

Fixed selling and administrative expenses $62,700$

Variable selling and administrative expenses $75,800$

The company is evaluating a proposal to manufacture $32,000$ units instead of $28,800$ 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.

Question Content Area

a$.1.$ Prepare an estimated income statement, comparing operating results if $28,800$ and $32,000$ 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 $31$

$28,800$ Units Manufactured $32,000$ Units Manufactured

Sales

$Sales

$Sales

Cost of goods sold:

Cost of goods manufactured

$Cost of goods manufactured

$2,589,120$

$Cost of goods manufactured

Inventory, October $31$

Inventory, October $31$

Inventory, October $31$

Total cost of goods sold

$Total cost of goods sold

$Total cost of goods sold

Gross profit

$Gross profit

$Gross profit

Selling and administrative expenses

Selling and administrative expenses

Selling and administrative expenses

Operating income

$Operating income

$Operating income