The demand for solvent, one of numerous products manufactured by RZM 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 product can be started on June 1, one month in the future. No changes will be needed in the present production facilities to 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 May or to suspend the manufacture of solvent until June 1. The controller has assembled the following pertinent data:
RZM Industries Inc. |
Income Statement—Solvent |
For the Month Ended April 30 |
1 |
Sales (4,000 units) |
$500,000.00 |
2 |
Cost of goods sold |
424,000.00 |
3 |
Gross profit |
$76,000.00 |
4 |
Selling and administrative expenses |
102,000.00 |
5 |
Loss from operations |
$(26,000.00) |
The production costs and selling and administrative expenses, based on production of 4,000 units in April, are as follows:
Direct materials | $45 per unit |
Direct labor | 20 per unit |
Variable manufacturing cost | 16 per unit |
Variable selling and administrative expenses | 15 per unit |
Fixed manufacturing cost | $100,000 for April |
Fixed selling and administrative expenses | 42,000 for April |
Sales for May are expected to drop about 20% below those of the preceding month. No significant changes are anticipated in the fixed costs or variable costs per unit. No extra costs will be incurred in discontinuing operations in the portion of the plant associated with solvent. The inventory of solvent at the beginning and end of May is expected to be inconsequential.
Required: | |||
1. | Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals.* | ||
2. | Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals.* | ||
3. | What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? If a loss is incurred, enter that amount as a negative number using a minus sign. | ||
4. | What advice should the controller give to management?
|
Prepare an estimated income statement in absorption costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.
RZM Industries Inc. |
Estimated Income Statement—Absorption Costing—Solvent |
1 |
|||
2 |
|||
3 |
|||
4 |
|||
5 |
|||
6 |
|||
7 |
|||
8 |
|||
9 |
|||
10 |
|||
11 |
|||
12 |
|||
13 |
Prepare an estimated income statement in variable costing form for May for solvent, assuming that production continues during the month. Round amounts to two decimals. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.
RZM Industries Inc. |
Estimated Income Statement—Variable Costing—Solvent |
1 |
|
|
|
2 |
|||
3 |
|||
4 |
|||
5 |
|||
6 |
|||
7 |
|||
8 |
|||
9 |
|||
10 |
|||
11 |
|||
12 |
|||
13 |
|||
14 |
What would be the estimated loss in income from operations if the solvent production were temporarily suspended for May? If a loss is incurred, enter that amount as a negative number using a minus sign. ___________
Labels | |
Cost of goods sold | |
Fixed costs | |
For the Month Ending May 31 | |
May 31 | |
Selling and administrative expenses | |
Variable cost of goods sold | |
Amount Descriptions | |
Contribution margin | |
Contribution margin ratio | |
Direct labor | |
Direct materials | |
Fixed manufacturing cost | |
Fixed selling and administrative expenses | |
Gross profit | |
Income from operations | |
Loss from operations | |
Manufacturing margin | |
Planned contribution margin | |
Sales | |
Sales mix | |
Total cost of goods sold | |
Total fixed costs | |
Total selling and administrative expenses | |
Total variable cost of goods sold | |
Variable manufacturing cost | |
Variable selling and administrative expenses |
The demand for solvent, one of numerous products manufactured by RZM Industries Inc., has dropped...
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 product can be started on November 1, one month in the future No changes will be needed in the present production facilities to manufacture the new product because only the mixture of the various...
Income Statements under Absorption Costing and Variable Costing The demand for aloe vera hand lotion, one of numerous products manufactured by Smooth Skin Care Products 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 product can be started on December 1, one month in the future. No changes will be needed in the present production facilities...
Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (88,000 units) during the first month, creating an ending inventory of 6,000 units. During June, the company produced 80,200 garments during the month but sold 86,200 units at $92 per unit. The June manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total Cost Manufacturing...
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows: 1 Sales $10,800,000.00 1 Manufacturing costs: Direct materials Direct labor $6,400,000.00 1,600,000.00 1.280,000.00 320,000.00 Variable manufacturing cost 9,600,000.00 Fixed manufacturing cost Selling and administrative expenses: Variable $1,080,000.00 180,000.00 Fixed 1,260,000.00 Required: 1. Prepare an income statement based on the absorption costing concept." 2. Prepare an income statement based on the...
I have finished the first part, and in
desperate need help on part 2 and final question. Please show work
thank you very much!
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...
Prior to the first month of operations ending October 31, Marshall Inc. estimated the following operating results: 1 Sales (28,800 × $80) $2,304,000.00 2 Manufacturing costs (28,800 units): 3 Direct materials 1,267,200.00 4 Direct labor 316,800.00 5 Variable factory overhead 172,800.00 6 Fixed factory overhead 221,760.00 7 Fixed selling and administrative expenses 28,800.00 8 Variable selling and administrative expenses 35,800.00 The company is evaluating a proposal to manufacture 36,000 units instead of 28,800 units, thus creating an ending inventory of...
During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 60,000 mini refrigerators, of which 54,000 were sold. Operating data for the month are summarized as follows: 1 Sales $10,260,000.00 2 Manufacturing costs: 3 Direct materials $5,100,000.00 4 Direct labor 1,800,000.00 5 Variable manufacturing cost 1,200,000.00 6 Fixed manufacturing cost 840,000.00 8,940,000.00 7 Selling and administrative expenses: 8 Variable $972,000.00 9 Fixed 324,000.00 1,296,000.00 Required: 1. Prepare an income statement based on the absorption costing concept.* 2....
** how do I calculate the income from operations? I subtracted the sum of fixed manufacturing costs and fixed selling and administrative expenses from the contribution margin and got 15680 but my homework marks it as incorrect. ill put the problem below. On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing: Morristown & Co. Absorption Costing Income Statement For Month Ended October 31, 20-- 1 Sales...
Instructions Labels and Amount Descriptions Absorption Costing Income Statement July Instructions During the first month of operations ended July 31, Westem Creations Company produced 55,000 designer cowboy hats, of which 51,150 were sold. Operating data for the month are summarized as follows: 59951025.00 $40150000 137.500.00 Varble tacturing cost 60,500.00 55.000.00 65450000 56092000 During August Westem Creations produced 47300 designer Cowboy hats and sold 51,150 cowboyhats Operating data for August are summarized as follows: Pro Absorption and variable costing Income statements...
During the first month of operations ended July 31, 2016, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows: 1 Sales $104,000.00 2 Manufacturing costs: 3 Direct materials $47,360.00 4 Direct labor 22,400.00 5 Variable manufacturing cost 12,160.00 6 Fixed manufacturing cost 15,360.00 97,280.00 7 Selling and administrative expenses: 8 Variable $10,920.00 9 Fixed 5,200.00 16,120.00 During August Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operating...