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 (14,400 x $50) $720,000 Manufacturing costs (14,400 units): Direct materials 437,760 Direct labor 103,680 Variable factory overhead 48,960 Fixed factory overhead 57,600 15,700 Fixed selling and administrative expenses Variable selling and administrative expenses 19,000 The company is evaluating a proposal to manufacture 16,000 units instead of 14,400 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. a. 1. Prepare an estimated income statement, comparing operating results if 14,400 and 16,000 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 14,400 Units Manufactured 16,000 Units Manufactured Cost of goods sold: $ $ a. 2. Prepare an estimated income statement, comparing operating results if 14,400 and 16,000 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 14,400 Units Manufactured 16,000 Units Manufactured Variable cost of goods sold: $ $ $ 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? overhead cost over a number of units. Thus, The increase in income from operations under absorption costing is caused by the allocation of the cost of goods sold is The difference can also be explained by the amount of inventory. overhead cost included in the