Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (18,400 x $66) $1,214,400 Manufacturing costs (18,400 units): Direct materials Direct labor 726,800 172,960 Variable factory overhead 80,960 Fixed factory overhead 95,680 Fixed selling and administrative expenses 26,000 Variable selling and administrative expenses 31,500

Prior to the first month of operations ending October 31, Marshall Inc, estimated the following operating results: The company is evaluating a proposal to manufacture 20,800 units instead of 18,400 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 18,400 and 20,800 units are manufactured in the absorption costing b. What is the reason for the difference in operating income reported for the two leveis of production by the absorption costing income statement The increase in income from operations under absorption costing is caused by the allocotion of overhead cost over a number of units. Thus, the cost of goods sold is: amount of overhead cost included in the The difference can also be explained by the inventory. a. 2. Prepare an estimated income statement, comparing operating results if 18,400 and 20,800 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank