Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (13,600 x $48) $652,800 Manufacturing costs (13,600 units): Direct materials 393,040 Direct labor 92,480 Variable factory overhead 43,520 Fixed factory overhead 51,680 Fixed selling and administrative expenses 14,100 Variable selling and administrative expenses 17,000 The company is evaluating a proposal to manufacture 15,200 units instead of 13,600 units, thus creating an ending inventory of 1,600 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 13,600 and 15,200 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Absorption Costing Income Statement For the Month Ending October 31 13,600 Units Manufactured 15,200 Units Manufactured $fill in the blank 4b3d78fbbf9a06d_2 $fill in the blank 4b3d78fbbf9a06d_3 Cost of goods sold: $fill in the blank 4b3d78fbbf9a06d_5 $fill in the blank 4b3d78fbbf9a06d_6 fill in the blank 4b3d78fbbf9a06d_8 fill in the blank 4b3d78fbbf9a06d_9 $fill in the blank 4b3d78fbbf9a06d_11 $fill in the blank 4b3d78fbbf9a06d_12 $fill in the blank 4b3d78fbbf9a06d_14 $fill in the blank 4b3d78fbbf9a06d_15 fill in the blank 4b3d78fbbf9a06d_17 fill in the blank 4b3d78fbbf9a06d_18 $fill in the blank 4b3d78fbbf9a06d_20 $fill in the blank 4b3d78fbbf9a06d_21 a. 2. Prepare an estimated income statement, comparing operating results if 13,600 and 15,200 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 13,600 Units Manufactured 15,200 Units Manufactured $fill in the blank 1b8636fcffa1ffa_2 $fill in the blank 1b8636fcffa1ffa_3 Variable cost of goods sold: $fill in the blank 1b8636fcffa1ffa_5 $fill in the blank 1b8636fcffa1ffa_6 fill in the blank 1b8636fcffa1ffa_8 fill in the blank 1b8636fcffa1ffa_9 $fill in the blank 1b8636fcffa1ffa_11 $fill in the blank 1b8636fcffa1ffa_12 $fill in the blank 1b8636fcffa1ffa_14 $fill in the blank 1b8636fcffa1ffa_15 fill in the blank 1b8636fcffa1ffa_17 fill in the blank 1b8636fcffa1ffa_18 $fill in the blank 1b8636fcffa1ffa_20 $fill in the blank 1b8636fcffa1ffa_21 Fixed costs: $fill in the blank 1b8636fcffa1ffa_23 $fill in the blank 1b8636fcffa1ffa_24 fill in the blank 1b8636fcffa1ffa_26 fill in the blank 1b8636fcffa1ffa_27 Total fixed costs $fill in the blank 1b8636fcffa1ffa_28 $fill in the blank 1b8636fcffa1ffa_29 $fill in the blank 1b8636fcffa1ffa_31 $fill in the blank 1b8636fcffa1ffa_32 b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? The increase in income from operations under absorption costing is caused by the allocation of ________overhead cost over a ________ number of units. Thus, the cost of goods sold is _________ . The difference can also be explained by the amount of _________ overhead cost included in the ____________ inventory.

Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (13,600 x $48) $652,800 Manufacturing costs (13,600 units): Direct materials 393,040 Direct labor 92,480 Variable factory overhead 43,520 Fixed factory overhead 51,680 Fixed selling and administrative expenses 14,100 Variable selling and administrative expenses 17,000 The company is evaluating a proposal to manufacture 15,200 units instead of 13,600 units, thus creating an ending inventory of 1,600 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 13,600 and 15,200 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Absorption Costing Income Statement For the Month Ending October 31 13,600 Units Manufactured 15,200 Units Manufactured $fill in the blank 4b3d78fbbf9a06d_2 $fill in the blank 4b3d78fbbf9a06d_3 Cost of goods sold: $fill in the blank 4b3d78fbbf9a06d_5 $fill in the blank 4b3d78fbbf9a06d_6 fill in the blank 4b3d78fbbf9a06d_8 fill in the blank 4b3d78fbbf9a06d_9 $fill in the blank 4b3d78fbbf9a06d_11 $fill in the blank 4b3d78fbbf9a06d_12 $fill in the blank 4b3d78fbbf9a06d_14 $fill in the blank 4b3d78fbbf9a06d_15 fill in the blank 4b3d78fbbf9a06d_17 fill in the blank 4b3d78fbbf9a06d_18 $fill in the blank 4b3d78fbbf9a06d_20 $fill in the blank 4b3d78fbbf9a06d_21 a. 2. Prepare an estimated income statement, comparing operating results if 13,600 and 15,200 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank. Marshall Inc. Variable Costing Income Statement For the Month Ending October 31 13,600 Units Manufactured 15,200 Units Manufactured $fill in the blank 1b8636fcffa1ffa_2 $fill in the blank 1b8636fcffa1ffa_3 Variable cost of goods sold: $fill in the blank 1b8636fcffa1ffa_5 $fill in the blank 1b8636fcffa1ffa_6 fill in the blank 1b8636fcffa1ffa_8 fill in the blank 1b8636fcffa1ffa_9 $fill in the blank 1b8636fcffa1ffa_11 $fill in the blank 1b8636fcffa1ffa_12 $fill in the blank 1b8636fcffa1ffa_14 $fill in the blank 1b8636fcffa1ffa_15 fill in the blank 1b8636fcffa1ffa_17 fill in the blank 1b8636fcffa1ffa_18 $fill in the blank 1b8636fcffa1ffa_20 $fill in the blank 1b8636fcffa1ffa_21 Fixed costs: $fill in the blank 1b8636fcffa1ffa_23 $fill in the blank 1b8636fcffa1ffa_24 fill in the blank 1b8636fcffa1ffa_26 fill in the blank 1b8636fcffa1ffa_27 Total fixed costs $fill in the blank 1b8636fcffa1ffa_28 $fill in the blank 1b8636fcffa1ffa_29 $fill in the blank 1b8636fcffa1ffa_31 $fill in the blank 1b8636fcffa1ffa_32 b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement? The increase in income from operations under absorption costing is caused by the allocation of ____overhead cost over a number of units. Thus, the cost of goods sold is _ . The difference can also be explained by the amount of _ overhead cost included in the ________ inventory.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 8E: Estimated income statements, using absorption and variable costing Prior to the first month of...

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Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results:

Sales (13,600 x $48)	$652,800
Manufacturing costs (13,600 units):
Direct materials	393,040
Direct labor	92,480
Variable factory overhead	43,520
Fixed factory overhead	51,680
Fixed selling and administrative expenses	14,100
Variable selling and administrative expenses	17,000

The company is evaluating a proposal to manufacture 15,200 units instead of 13,600 units, thus creating an ending inventory of 1,600 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 13,600 and 15,200 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

Marshall Inc.
Absorption Costing Income Statement
For the Month Ending October 31
	13,600 Units Manufactured	15,200 Units Manufactured
	$fill in the blank 4b3d78fbbf9a06d_2	$fill in the blank 4b3d78fbbf9a06d_3
Cost of goods sold:
	$fill in the blank 4b3d78fbbf9a06d_5	$fill in the blank 4b3d78fbbf9a06d_6
	fill in the blank 4b3d78fbbf9a06d_8	fill in the blank 4b3d78fbbf9a06d_9
	$fill in the blank 4b3d78fbbf9a06d_11	$fill in the blank 4b3d78fbbf9a06d_12
	$fill in the blank 4b3d78fbbf9a06d_14	$fill in the blank 4b3d78fbbf9a06d_15
	fill in the blank 4b3d78fbbf9a06d_17	fill in the blank 4b3d78fbbf9a06d_18
	$fill in the blank 4b3d78fbbf9a06d_20	$fill in the blank 4b3d78fbbf9a06d_21

a. 2. Prepare an estimated income statement, comparing operating results if 13,600 and 15,200 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank.

Marshall Inc.
Variable Costing Income Statement
For the Month Ending October 31
	13,600 Units Manufactured	15,200 Units Manufactured
	$fill in the blank 1b8636fcffa1ffa_2	$fill in the blank 1b8636fcffa1ffa_3
Variable cost of goods sold:
	$fill in the blank 1b8636fcffa1ffa_5	$fill in the blank 1b8636fcffa1ffa_6
	fill in the blank 1b8636fcffa1ffa_8	fill in the blank 1b8636fcffa1ffa_9
	$fill in the blank 1b8636fcffa1ffa_11	$fill in the blank 1b8636fcffa1ffa_12
	$fill in the blank 1b8636fcffa1ffa_14	$fill in the blank 1b8636fcffa1ffa_15
	fill in the blank 1b8636fcffa1ffa_17	fill in the blank 1b8636fcffa1ffa_18
	$fill in the blank 1b8636fcffa1ffa_20	$fill in the blank 1b8636fcffa1ffa_21
Fixed costs:
	$fill in the blank 1b8636fcffa1ffa_23	$fill in the blank 1b8636fcffa1ffa_24
	fill in the blank 1b8636fcffa1ffa_26	fill in the blank 1b8636fcffa1ffa_27
Total fixed costs	$fill in the blank 1b8636fcffa1ffa_28	$fill in the blank 1b8636fcffa1ffa_29
	$fill in the blank 1b8636fcffa1ffa_31	$fill in the blank 1b8636fcffa1ffa_32

b. What is the reason for the difference in operating income reported for the two levels of production by the absorption costing income statement?

The increase in income from operations under absorption costing is caused by the allocation of ________overhead cost over a ________ number of units. Thus, the cost of goods sold is _________ . The difference can also be explained by the amount of _________ overhead cost included in the ____________ inventory.

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