Question
Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending April 30, 2016, Jadelis Industries Inc. estimated the following
Estimated Income Statements, using Absorption and Variable Costing
Prior to the first month of operations ending April 30, 2016, Jadelis Industries Inc. estimated the following operating results:
Sales (24,000 x $83) | $1,992,000 | ||
Manufacturing costs (24,000 units): | |||
Direct materials | 1,204,800 | ||
Direct labor | 285,600 | ||
Variable factory overhead | 132,000 | ||
Fixed factory overhead | 158,400 | ||
Fixed selling and administrative expenses | 43,100 | ||
Variable selling and administrative expenses | 52,100 |
The company is evaluating a proposal to manufacture 26,400 units instead of 24,000 units, thus creating an ending inventory of 2,400 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.
1. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the absorption costing format.
Jadelis Industries Inc. | ||
Absorption Costing Income Statement | ||
For the Month Ending April 30, 2016 | ||
24,000 Units Manufactured | 26,400 Units Manufactured | |
Sales | $ | $ |
Cost of goods sold: | ||
Cost of goods manufactured | $ | $ |
Less inventory, April 30 | f | |
Cost of goods sold | $ | $ |
Gross profit | $ | $ |
Selling and administrative expenses | ||
Income from operations | $ | $ |
a. 2. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the variable costing format.
Jadelis Industries Inc. | ||
Variable Costing Income Statement | ||
For the Month Ending April 30, 2016 | ||
24,000 Units Manufactured | 26,400 Units Manufactured | |
Sales | $ | $ |
Variable cost of goods sold: | ||
Variable cost of goods manufactured | $ | $ |
Less inventory, April 30 | ||
Variable cost of goods sold | $ | $ |
Manufacturing margin | $ | $ |
Variable selling and administrative expenses | ||
Contribution margin | $ | $ |
Fixed costs: | ||
Fixed factory overhead | $ | $ |
Fixed selling and administrative expenses | ||
Total fixed costs | $ | $ |
Income from operations | $ | $ |
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