Question
Estimated income statements, using absorption costing and variable costing Prior to the first month of operations ending April 30, 2012, Jadelis Industries Inc. estimated the
Estimated income statements, using absorption costing and variable costing
Prior to the first month of operations ending April 30, 2012, Jadelis Industries Inc. estimated the following operating results:
Sales (24,000 x $83) | $1,992,000 | ||
Manufacturing costs (24,000 units): | |||
Direct materials | 1,204,800 | ||
Direct labor | 285,600 | ||
Variable factory overhead | 132,000 | ||
Fixed factory overhead | 158,400 | ||
Fixed selling and administrative expenses | 43,100 | ||
Variable selling and administrative expenses | 52,100 |
The company is evaluating a proposal to manufacture 26,400 units instead of 24,000 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.
1. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the absorption costing format.
2. Prepare an estimated income statement, comparing operating results if 24,000 and 26,400 units are manufactured in the variable costing format.
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