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 (23,200 x $81) $1,879,200 Manufacturing costs (23,200 units): Direct materials 1,127,520 Direct labor 266,800 Variable factory overhead 125,280 Fixed factory overhead 148,490 Fixed selling and administrative expenses 40,400 Variable selling and administrative expenses 48,800 The company is evaluating a proposal to manufacture 25,600 units instead of 23,200 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. a. 1. Prepare an estimated income statement, comparing operating results if 23,200 and 25,600 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 23,200 Units Manufactured 25,600 Units Manufactured Sales 1.879.200 1,879.200 Cost of goods sold: Cost of goods manufactured Inventory, October 31 Total cost of goods sold Gross profit Selling and administrative expenses Operating income a. 2. Prepare an estimated income statement, comparing operating results if 23,200 and 25,500 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 23,200 Units Manufactured 25,600 Units Manufactured Sales Variable cost of goods sold: Variable cost of goods manufactured Inventory, October 31 Total 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 QOI0 0000 Dono poi Operating income Variable and Absorption Costing-Three Products Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: Winslow Inc. Product Income Statements-Absorption Costing For the Year Ended December 31, 20Y1 Cross Training Shoes Golf Shoes Running Shoes Revenues $335,900 $204,900 $170,100 Cost of goods sold (174,700) (100,400) (114,000) Gross profit $161,200 $104,500 $56,100 Selling and administrative expenses (138,600) (75,200) (93,700) Operating income $22,600 $29,300 $(37,600) In addition, you have determined the following information with respect to allocated fixed costs: Cross Golf Running Training hoes Shoes Fixed costs: Cost of goods sold $53,700 $26,600 $23,800 Selling and administrative expenses 40,300 24,600 23,800 These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have Cross Training Shoes Golf Shoes Running Shoes Fixed costs: Cost of goods sold $53,700 $25,500 $23,800 Selling and administrative expenses 40,300 24,600 23,800 These fixed costs are used to support all three product lines and will not change with the elimination of any one product. In addition, you have determined that the effects of inventory may be ignored. The management of the company has deemed the profit performance of the running shoeline as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $37,600. a. Are management's decision and conclusions correct? Management's decision and conclusion are incorrect manufacturing and selling running shoes will not The profit will not be improved because the fixed costs used in be avoided if the line is eliminated. Fee Check My Wor Consider the impact the elimination of the running shoe line would have on the fixed costs. b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign. Running Shoes 170.100 Winslow Inc. Variable Costing Income Statements-Three Product Lines For the Year Ended December 31, 2011 Cross Training Shoes Golf Shoes Revenues 335.900 204.900 Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs 53,700 26, 60 v 23,800 Fixed selling and administrative expenses 40,300 24600 23.800 Total fixed costs 94,000 51.200 47,600 Operating income (less)