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 (24,800 x $88) $2,182,400 Manufacturing costs (24,800 units): Direct materials 1,319,360 Direct labor 312,480 Variable factory overhead 146,320 Fixed factory overhead 173,600 Fixed selling and administrative expenses 47,200 Variable selling and administrative expenses 57,100 The company is evaluating a proposal to manufacture 28,000 units instead of 24,800 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. a. 1. Prepare an estimated income statement, comparing operating results if 24,800 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 24,800 Units Manufactured 28,000 Units Manufactured Sales Cost of goods sold: $ Operating loss $ $ a. 2. Prepare an estimated income statement, comparing operating results if 24,800 and 28,000 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 24,800 Units Manufactured 28,000 Units Manufactured Sales Variable cost of goods sold: Variable cost of goods manufactured $ $ $ $ Fixed costs: $ Total fixed costs $ 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 in income from operations under absorption costing is caused by the allocation of sold is . The difference can also be explained by the amount of overhead cost over a overhead cost included in the number of units. Thus, the cost of goods inventory