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EX 21-8 Estimated income statements, using absorption and variable costing Obj. 1,2 Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (40,000 x $90) Manufacturing costs (40,000 units): Direct materials Direct labor....... Variable factory overhead. Fixed factory overhead.. Fixed selling and administrative expenses.. Variable selling and administrative expenses.... $3,600,000 1,440,000 480,000 240,000 120,000 75,000 200,000 The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? b.

EX 21-8 Estimated income statements, using absorption and variable costing Obj. 1,2 Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (40,000 x $90) Manufacturing costs (40,000 units): Direct materials Direct labor....... Variable factory overhead. Fixed factory overhead.. Fixed selling and administrative expenses.. Variable selling and administrative expenses.... $3,600,000 1,440,000 480,000 240,000 120,000 75,000 200,000 The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? b.

Accounting
Accounting
27th Edition
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Chapter21: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21.28EX: Appendix Absorption costing income statement On June 30, the end of the first month of operations,...
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EX 21-8 Estimated income statements, using absorption and variable costing Obj. 1,2 Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (40,000 x $90) Manufacturing costs (40,000 units): Direct materials Direct labor....... Variable factory overhead. Fixed factory overhead.. Fixed selling and administrative expenses.. Variable selling and administrative expenses.... $3,600,000 1,440,000 480,000 240,000 120,000 75,000 200,000 The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? b.
Transcribed Image Text:EX 21-8 Estimated income statements, using absorption and variable costing Obj. 1,2 Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (40,000 x $90) Manufacturing costs (40,000 units): Direct materials Direct labor....... Variable factory overhead. Fixed factory overhead.. Fixed selling and administrative expenses.. Variable selling and administrative expenses.... $3,600,000 1,440,000 480,000 240,000 120,000 75,000 200,000 The company is evaluating a proposal to manufacture 50,000 units instead of 40,000 units, thus creating an ending inventory of 10,000 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. Prepare an estimated income statement, comparing operating results if 40,000 and 50,000 units are manufactured in (1) the absorption costing format and (2) the variable costing format. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? b.
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