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 (20,800 x $73) $1,518,400 Manufacturing costs (20,800 units) Direct materials 917,280 Direct labor 216,320 Variable factory overhead 101,920 Fixed factory overhead 120,640 Fixed selling and administrative expenses 32,800 Variable selling and administrative expenses 39,700 The company is evaluating a proposal to manufacture 23,200 units instead of 20,800 units, thus creating an Inventory, October 31 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 a 1 Prepare an estimated income statement, comparing operating results if 20,800 and 23,200 units are manufactured in the absorption costing format If an amount box does not require an entry leave it blank or enter 0 Marshall Inc Absorption Costing Income Statement For the Month Ending October 31 20,800 Units Manufactured 23,200 Units Manufactured $ $ Cost of goods sold $ $ $ $ $ $ Income from operations $ $ a 2 Prepare an estimated income statement, comparing operating results if 20,800 and 23,200 units are manufactured in the variable costing format If an amount box does not require an entry leave it blank or enter 0 Marshall Inc Variable Costing Income Statement For the Month Ending October 31 20,800 Units Manufactured 23,200 Units Manufactured $ $ Variable cost of goods sold $ $ $ $ $ $ $ $ Fixed costs $ $ Total fixed costs $ $ $ $ b What is the reason for the difference in income from operations 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 overhead cost over a number of units Thus, the cost of goods sold is The difference can also be explained by the amount of overhead cost included in the inventory

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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:

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 (20,800 x $73)	$1,518,400
Manufacturing costs (20,800 units):
Direct materials	917,280
Direct labor	216,320
Variable factory overhead	101,920
Fixed factory overhead	120,640
Fixed selling and administrative expenses	32,800
Variable selling and administrative expenses	39,700

The company is evaluating a proposal to manufacture 23,200 units instead of 20,800 units, thus creating an Inventory, October 31 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.

a. 1. Prepare an estimated income statement, comparing operating results if 20,800 and 23,200 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank or enter 0.

Marshall Inc.
Absorption Costing Income Statement
For the Month Ending October 31
	20,800 Units Manufactured	23,200 Units Manufactured
	$	$
Cost of goods sold:
	$	$

	$	$
	$	$

Income from operations	$	$

a. 2. Prepare an estimated income statement, comparing operating results if 20,800 and 23,200 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank or enter 0.

Marshall Inc.
Variable Costing Income Statement
For the Month Ending October 31
	20,800 Units Manufactured	23,200 Units Manufactured
	$	$
Variable cost of goods sold:
	$	$

	$	$
	$	$

	$	$
Fixed costs:
	$	$

Total fixed costs	$	$
	$	$

b. What is the reason for the difference in income from operations 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 __________ overhead cost over a __________ number of units. Thus, the cost of goods sold is ______________ . The difference can also be explained by the amount of ______________ overhead cost included in the ____________ inventory.