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Estimated Income Statements, using Absorption and Variable Costing Prior to the first month of operations ending January 3 1 , Lemke Inc. estimated the following
Estimated Income Statements, using Absorption and Variable Costing
Prior to the first month of operations ending January Lemke Inc. estimated the following operating results:
Line Item Description Amount
Sales times $ $
Manufacturing costs units:
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
Fixed selling and administrative expenses
Variable selling and administrative expenses
The company is evaluating a proposal to manufacture units instead of units, thus creating an ending inventory of 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 Prepare an estimated income statement, comparing operating results if and units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.
Lemke Inc.
Absorption Costing Income Statement
For the Month Ending January
Line Item Description Units
Manufactured Units
Manufactured
$ Select $ Select
Cost of goods sold:
$ Select $ Select
Select Select
$ Select $ Select
$ Select $ Select
Select Select
$ Select $ Select
Question Content Area
a Prepare an estimated income statement, comparing operating results if and units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.
Lemke Inc.
Variable Costing Income Statement
For the Month Ending January
Line Item Description Units
Manufactured Units
Manufactured
$ Select $ Select
Variable cost of goods sold:
$ Select $ Select
Select Select
$ Select $ Select
$ Select $ Select
Select Select
$ Select $ Select
Fixed costs:
$ Select $ Select
Select Select
Total fixed costs $Total fixed costs $Total fixed costs
$ Select $ Select
Question Content Area
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 operating income under absorption costing is caused by the allocation of fill in the blank of
overhead cost over a fill in the blank of
number of units. Thus, the cost of goods sold is fill in the blank of
The difference can also be explained by the amount of fill in the blank of
overhead cost included in the fill in the blank of
inventory.
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Auditing And Assurance Services An Integrated Approach
Authors: Alvin Arens
13th Edition
0136084737, 9780136084730
