The demand for Aloe Vera hand lotion, one of the numerous products manufactured by Smooth Skin Care Products Inc., has dropped sharply because of recnt 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 prodyct can be started on December 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 has been asked by the president of the company for advice on wether to continue production during November or suspend the manufacture of Aloe Vera hand lotion until Dec 1. The controller has assembled the following pertinent data:

Income Statements under Alsorption Costing and Vibe Corting The demand for aloe vera hand lotion, one of numerous products manufactured by Smooth Skin Care Products Inc., has de sharply because of recent comprom similar product. The company's chemists are currently completing tests of various new forms, and it is anticipated that the acture of a proto beated on December 1, one month in the future. No changes will be meded in the present production facilities to manufacture the new product Decinese only the mature of the materials will be changed. The controller has been asked by the pretudent of the comowy for advice on whether to continue production du November to solve come non vere hond lotion until December 1 The controller has bed the following bertinda Smooth Skin Care Products Inc. Income Statement Aloe Vera Hand Lotion For the Month Ended October 31 Sales (200,000 units) $32,000,000 Cost of goods sold (25.330,000) Gross profit $3,670,000 Selling and administrative expenses (4,270,000) Operating loss (600,000) The production costs and selling and administrative expenses, based on production of 400,000 units in October, se as follows Direct materials 515 per unit Direct labor 17 per unit Variable manufacturing cost 35 per unit Variable selling and administrative expenses 10 per unit Fixed manufacturing cost $1,530,000 for October Fixed selling and administrative expenses 270,000 for October ht Submit Assignment for Gran 38:19 000 67" Sunt 10 Fixed selling and administrative expenses 270,000 for October Sales for November are expected to drop about 20% below those of the preceding month. No significant changes are anticipated in the fixed costs of variable coperto extent cont will be incurred in discontinuing operations in the portion of the planted wah woe verhand lotion. The inventory of aloe vera lood on at the beginning end of November is expected to be inconsequential Requiredi 1. Prepare an estimated income statement to bioption costing form for November for hoe verband lotion, sering that production continues during the month Smooth Skin Care Products Inc Estimated Income Statement Absorption Costing Aloe Vera Hand Lotion For the Month Ending November 30 Cost of goods sold Selling and administrative expenses . in Ne Submit Assignment for 2. Prepare an estimated Income statement in variabile conting form for November for aloe vera hand lotion, assuming that production continues during the month, Smooth Skin Care Products Inc Estimated Income Statement Variable Costing Aloe Vera Wand Lotion For the Month Ending November 30 Variable cost of goods sold Foxed costs w! OO 3. What would be the estimated operating loss of the aloe vera handlotion production were temporarily suspended for November? No 3. What would be the estimated operating loss if the aloe vera hand lotion production were temporarily suspended for November? 4. What advice should the controller give to management? Production of lotion should be Temporary suspension of production would result in an operating loss of operating loss of production is continued. The result would be savings of compared with an