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need help. Thank you Instructions The demand for solvent, one of numerous products manufactured by RZM Industries Inc., has dropped sharply because of recent competition
need help. Thank you
Instructions The demand for solvent, one of numerous products manufactured by RZM 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 product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various materials will be changed. The controller han been asked by the president of the company for advice on whether to continue production during May or to suspend the manutacture of solvert until June 1. The controller has assembled the following pertinent data: RZM Industries Inc $500,000.00 424,000.00 Income Statement-Solvent For the Month Ended April 30 + Sales (4.000 units) Cost of goods sold 1 Gross profit Selling and administrative expenses Laws from operations $76,000.00 102,000.00 $(26,000,00) Instructions The production costs and selling and administrative expenses, based on production of 4,000 units in April, are as follows: $45 per unit 20 per unit 16 per unit Direct materials Direct labor Variable manufacturing cost Variable selling and administrative expenses Fixed manufacturing com Fixed selling and administrative expenses 15 per unit $100.000 for April 42,000 for April Sales for May are expected to drop about 20% below those of the preceding month 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 of solvent at the beginning and end of May is expected to be inconsequential Required: 1. Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month Round amounts to two decimals 2. Prepare an estimated income statement in variable costing form for May for solvent assuring that production continues during the month. Round amounts to two decimals 3. What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? Ir a loss is incurred, enter that amount as a negative number using a minus sign 4. What advice should the controller give to management? *Refer to the list of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () will automatically appear if it is required Ifa niet loss is incurred, enter that amount as a negative number uning a minus sign
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