Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: Sales (30,400 x $106) $3,222,400 Manufacturing costs (30,400 units): Direct materials 1,939,520 Direct labor 459,040 Variable factory overhead 215,840 Fixed factory overhead 255,360 Fixed selling and administrative expenses 69,500 Variable selling and administrative expenses 84,000 The company is evaluating a proposal to manufacture 33,600 units instead of 30,400 units, thus creating an ending inventory of 3,200 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 30,400 and 33,600 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 30,400 Units Manufactured 33,600 Units Manufactured Sales ? ? Cost of goods sold: Cost of goods manufactured ? ? Inventory, October 31 ? ? Total cost of goods sold ? ? Gross profit ? ? Selling and administrative expenses ? ? Operating income ? ? a. 2. Prepare an estimated income statement, comparing operating results if 30,400 and 33,600 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 30,400 Units Manufactured 33,600 Units Manufactured Sales ? ? Variable cost of goods sold: Variable cost of goods manufactured ? ? Inventory, October 31 ? ? Total variable cost of goods sold ? ? Manufacturing margin ? ? Variable selling and administrative expenses ? ? Contribution margin ? ? Fixed costs: Fixed factory overhead ? ? Fixed selling and administrative expenses ? ? Total fixed costs ? ? Operating income ? ?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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 (30,400 x $106) | $3,222,400 | |
| Manufacturing costs (30,400 units): | ||
| Direct materials | 1,939,520 | |
| Direct labor | 459,040 | |
| Variable factory |
215,840 | |
| Fixed factory overhead | 255,360 | |
| Fixed selling and administrative expenses | 69,500 | |
| Variable selling and administrative expenses | 84,000 |
The company is evaluating a proposal to manufacture 33,600 units instead of 30,400 units, thus creating an ending inventory of 3,200 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 30,400 and 33,600 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 | ||
| 30,400 Units Manufactured | 33,600 Units Manufactured | |
| Sales | ? | ? |
| Cost of goods sold: | ||
| Cost of goods manufactured | ? | ? |
| Inventory, October 31 | ? | ? |
| Total cost of goods sold | ? | ? |
| Gross profit | ? | ? |
| Selling and administrative expenses | ? | ? |
| Operating income | ? | ? |
a. 2. Prepare an estimated income statement, comparing operating results if 30,400 and 33,600 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 | ||
| 30,400 Units Manufactured | 33,600 Units Manufactured | |
| Sales | ? | ? |
| Variable cost of goods sold: | ||
| Variable cost of goods manufactured | ? | ? |
| Inventory, October 31 | ? | ? |
| Total variable cost of goods sold | ? | ? |
| Manufacturing margin | ? | ? |
| Variable selling and administrative expenses | ? | ? |
| Contribution margin | ? | ? |
| Fixed costs: | ||
| Fixed factory overhead | ? | ? |
| Fixed selling and administrative expenses | ? | ? |
| Total fixed costs | ? | ? |
| Operating income | ? | ? |
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