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 (28,800 x $101)	$2,908,800
Manufacturing costs (28,800 units):
Direct materials	1,751,040
Direct labor	414,720
Variable factory overhead	192,960
Fixed factory overhead	230,400
Fixed selling and administrative expenses	62,700
Variable selling and administrative expenses	75,800

The company is evaluating a proposal to manufacture 32,000 units instead of 28,800 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.

Question Content Area

a. 1. Prepare an estimated income statement, comparing operating results if 28,800 and 32,000 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

a. 2. Prepare an estimated income statement, comparing operating results if 28,800 and 32,000 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.