Question

Instructions The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company's chemists are currently completing tests of various new formulas, and it is anticipated that the manufacture of a superior praduct can be started on November 1, one month in the future. No changes will be needed in the present production facilities manufacture the new product because only the mixture of the various materials will be changed The controller has been asked by the president of the company for advice on whether to continue production during October or to suspend the manufacture of salvent until November 1. The follawing data have been assembled: Logan Industries Inc. Income Statement-Solvent For the Month Ended September 30 1Sales (10,000 units) $800,000.00 (770,000.00) Cost of goods sold 2 3Gross profit $30,000.00 (100,000.00) Selling and administrative expenses 5Operating loss S(70,000.00)
I have finished the first part, and in desperate need help on part 2 and final question. Please show work thank you very much!

Answer 1

480,000 Answer to Part 2. Logan Industries Inc. Estimated Income Statement - Variable Costing - Solvent For the month ending October 31 Sales Variable Cost of Goods Sold: Direct Labor 144,000 Direct Materials 210,000 Variable Manufacturing Cost 48,000 Total Variable Cost of Goods Sold Manufacturing Margin Variable Selling and Administrative Expenses Contribution Margin Fixed Costs: Fixed Manufacturing Cost 100,000 Fixed Selling and Administrative Expenses 40,000 Total Fixed Costs Operating Loss 402,000 78,000 36,000 42,000 140,000 -98,000 Calculation: Units Sold = 10,000 - (10,000 * 40%) = 6,000 Units Direct Materials = 6,000 * $35 = $210,000 Direct Labor = 6,000 * $24 = $144,000 Variable Manufacturing Cost = 6,000 * $8 = $48,000 Variable Selling and Administrative Expenses = 6,000 * $6 = $36,000

The estimated operating loss would be -$140,000 if it would be temporarily suspended.