Estimated Income Statements, using Absorption and Variable Costing

Prior to the first month of operations ending January $31,$ Lemke Inc. estimated the following operating results:

Sales $(28,800$$$101)$

$$2,908,800$

Manufacturing costs units$)$:

Direct materials

$1,751,040$

Direct labor

$414,720$

Variable factory overhead

$192,960$

Fixed factory overhead

$230,400$

Fixed selling and administrative expenses

$62,700$

Variable selling and administrative expenses

$75,800$

The company is evaluating a proposal to manufacture $32,000$ units instead of $28,800$ 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 $28,800$ and $32,000$ units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank.

Lemke Inc.

Absorption Costing Income Statement

For the Month Ending January $31$

Line Item Description

$28,800$ Units $32,000$ Units

Matiufactured Manufactured

Cost of goods sold:

a$2)$ prepare estimated income statement conprung operating results if $28,800$ and $32,000$ units are manufactured in the varibale costing format if an amount box does not require an entry leave it blank