The demand for solvent, one of numerous products manufactured by Hipp Industries Inc., has dropped sharply because of recent competition from a similar product. The companys 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 has been asked by the president of the company for advice on whether to continue production during May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data: Hipp Industries Inc. Income StatementSolvent For the Month Ended April 31, 2013 Sales (2,800 units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $215,600 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,320 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,280 Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,780 Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,500) The production costs and selling and administrative expenses, based on production of 2,800 units in April, are as follows: Direct materials $30.00 per unit Direct labor 10.50 per unit Variable manufacturing cost 9.90 per unit Variable selling and administrative expenses 5.60 per unit Fixed manufacturing cost $46,200 for April Fixed selling and administrative expenses 26,100 for April Sales for May are expected to drop about 25% 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 associ- ated with solvent. The inventory of solvent at the beginning and end of May is expected to be inconsequential.OBJ. 1, 2 2. Income from operations, $195,950 OBJ. 1, 2 2. Contribution margin, $44,100214 Chapter 5 Variable Costing for Management Analysis PR 51A PR 52AInstructions 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, assuming that production continues during the month. Round amounts to two deci- mals. 3. What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? 4. What advice should the controller give to management? 5-Analyze answers