I have finished the first part, and in desperate need help on part 2 and final question. Please show work thank you very much!
Instructions The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company's chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior praduct can be started on November 1, one month in the future. No changes will be needed in the present production facilities manufacture the new product because only the mixture of the various materials will be changed The controller has been asked by the president of the company for advice on whether to continue production during October or to suspend the manufacture of salvent until November 1. The follawing data have been assembled: Logan Industries Inc. Income Statement-Solvent For the Month Ended September 30 1Sales (10,000 units) $800,000.00 (770,000.00) Cost of goods sold 2 3Gross profit $30,000.00 (100,000.00) Selling and administrative expenses 5Operating loss S(70,000.00) Instructions The production costs and selling and administrative expenses, based on production of 10,000 units in September, are as follows: $35 per unit Direct materials Direct labor 24 per unit Variable manufacturing cost 8 per unit Variable selling and administrative expenses 6 per unit $100,000 for September Fixed manufacturing cost Fixed selling and administrative expenses 40,000 for September Sales for October are expected to drop about 40 % below those of September. No significant changes are anticipated in the fixed costs or variable costs per unit. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent. The inventory solvent at the beginning and end of October is not expected to be significant (material). Required: 1. Prepare an estimated income statement in absorption costing form for October for solvent, assuming that production continues during the month. 2. Prepare an estimated income statement in variable costing form for October for solvent, assuming that production continues during the month. 3. What would be the estimated operating loss if the solvent production were temporarily suspended for October? fa loss is incurred, enter that amount as a negative number using a minus sign. What advice should you give to management? 4. Score: 101/101 Logan Industries Inc. Estimated Income Statement-Absorption Costing-Solvent For the Month Ending October 31 $480,000.00 1 Sales Cost of goods sold: 2 $210,000.00 Direct materials 3 Direct labor 144,000.00 4 Variable manufacturing cost 48,000.00 100,000.00 Fixed manufacturing cost 6 502,000.00 Total cost of goods sold 7 8 Gross profit $(22,000.00) Selling and administrative expenses: 9 $36,000.00 Variable selling and administrative expenses 10 Fixed selling and administrative expenses 40,000.00 11 Total selling and administrative expenses 76,000.00 12 $98,000.00) 13 Operating loss 2. Prepare an estimated income statement in variable costing form for October for solvent, assuming that production continues during the month. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative Score: 71/116 Logan Industries Inc. Estimated Income Statement-Variable Costing-Solvent For the Month Ending October 31 1 Sales Variable cost of goods sold: 2 Direct labor 3 Direct materials 4 Variable manufacturing cost 5 Total variable cost of goods sold 6 7 Manufacturing margin Variable selling and administrative expenses 8 9 Contribution margin 10 Fixed costs: Fixed manufacturing cost 11 Fixed selling and administrative expenses 12 Total fixed costs 13 14 Operating loss Final Questions Shaded cells have feedback. 3. What would be the estimated operating loss if the solvent production were temporarily suspended for October? If a loss is incurred, enter that amount as a negative number usinga minus sign. $140,000.00X Points: 0/1 Feedback Check My Work The estimated loss is calculated by adding the fixed manufacturing cost and the fixed selling and administrative expenses. 4. What advice should you give to management? if production is continued. The result would be a savings of Temporary suspension of production would result in an operating loss of $140,000 compared with an operating loss of $98,000 Production of solvent should be continued $42,000 Points: 4/4
