Tho demand lat solvent, ene of rumerous products manulacturnd of Logan industries inc, has diopped sharply because of recent compeition tom a similar product The compury's chemats are currentfy compieting tasts of vanicus ned formulas, and it is antopated thut the manutacture of a fupenor product can be misture of the vanous matoctait wa be changed. rolvent unter November 1 The following dath have been assembied: Instructions Logan Industries inc income Statement-Solvent For the Month Ended Sentember 30 1 Sales (10.000 units) 3. Cost of goods solid 1 Githe prafit 530.00000(770.000.00) 4. Selling and administrative experses Operating loss Then nroducton costs and selling and aidministritive expenses, based on production of 10,000 units in Seplumber, are as follows 3ales far Qcteber are expected fo drop about 400 below these of September. No thond cant changes are antcipated in the fored costs or variable costs per unit No estra costs wit be ncurred in drscontinuing operations in the portion of the piant associated with solvent. The inventery of solvent at the beginning and end af Sites lor Ociobet are expected to drop about 40 w. below those of September. No signficant changes ase anticipaled in the foved costs of variable costs per unit No extra costs will be incurred in discontinung operabions in the portion of the plant associated with solvent. The inventory of solvint at the beginning and ond of Dciober is fiot expected to be signiticant (materiat) Foquired: 1. Frepare an essimakied income statement in sosoipbon costifo form for Octooer for salvent assuming that proctuction continces during the moith * amount as a rifgatte number using a minus dogh 4. What a0ive shovid you ghy to management? Hequired: 1. Prepam an ostimated incomb afafement in absombiori coding farm for ociober for solvent, assithing that prosuction cortinues dump the month " arnount as a negative number 4aing a minus sign. 4. What acive ahoud you give fo mumagwment? calctiotion that restite in a nogotive amount For examble Net loss should be segatte cexample Not loss ahould be negative example Net loss should be negative. negutive nufnber iosing o mund sog 4. What advice should you give to managtment? Production of soivent shouid be Temporary cucpension of production would rascit in an operating ioss of an opetating kass of If production in contunued. The teault woxkd be a taxings of abels and Amount Descriptions Labels Cost of goods sold Fixed costs For the Month Ending October 31 October 31 Selling and administrative expenses Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Drect labor All worksavedi. e statements under absorntion costing and variable costin e statements under absorption costing and yariable costing
