Answer:
Marshall Inc.
1. Estimated Income Statement for the year ending October 31 (Absorption Costing)
Sales volume 40,000 Units 50,000 Units
Sales Revenue $2,120,000 $2,650,000
Cost of goods sold:
Direct materials ($31.90 per unit) 1,276,000 1,595,000
Direct labor ($7.60 per unit) 304,000 380,000
Variable factory overhead ($3.50 per unit) 140,000 175,000
Fixed factory overhead 63,840 63,840
Total cost of goods sold $1,783,840 $2,213,840
Gross profit $336,160 $436,160
Expenses:
Fixed selling & administrative expenses 17,400 17,400
Variable selling & administrative expenses 55,263 69,079
Total selling & administrative expenses $72,663 $86,479
Net income $263,497 $349,681
2. Estimated Income Statement for the year ending October 31 (Variable Costing)
Sales volume 15,200 Units 16,800 Units
Sales Revenue $805,600 $890,400
Cost of goods sold:
Direct materials ($31.90 per unit) 484,880 535,920
Direct labor ($7.60 per unit) 115,520 127,680
Variable factory overhead ($3.50 per unit) 53,200 58,800
Variable selling & administrative expenses 21,000 23,210
Total Variable costs $674,600 $745,610
Gross profit $131,000 $144,790
Fixed Expenses:
Fixed selling & administrative expenses 17,400 17,400
Fixed factory overhead 63,840 63,840
Total fixed expenses $81,240 $81,240
Net income $49,760 $63,550
Explanation:
a) Data and Calculations:
Estimated Operating Results
Sales (15,200 x $53) $805,600
Manufacturing costs (15,200 units):
Direct materials 484,880 ($31.90 per unit)
Direct labor 115,520 ($7.60 per unit)
Variable factory overhead 53,200 ($3.50 per unit)
Fixed factory overhead 63,840
Fixed selling and administrative expenses 17,400
Variable selling and administrative expenses 21,000
