InstructionsThe demand for solvent, one of numerous products manufactured by Celecia Industries Inc., has dropped sharply becauseof recent competition from a similar product. The company's chemists are currently completing tests of various newformulas, and it is anticipated that the manufacture of a superior product can be started on July 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 ofthe various materials will be changed.The controller has been asked by the president of the company for advice on whether to continue production during Juneor to suspend the manufacture of solvent until July 1. The following data have been assembled:Celecia Industries Inc.Direct materialsIncome Statement-Solvent1 Sales (25,000 units x $15 per unit)2 Cost of goods sold3Gross profit4 Selling and administrative expenses5 Operating lossDirect laborFor the Month Ended May 31The production costs and selling and administrative expenses, based on production of 25,000 units in May, are as follows:Variable manufacturing costVariable selling and administrative expenses$375,000.00(256,250.00)$118,750.00(77,500.00)$41,250.00Fixed manufacturing costFixed selling and administrative expenses$2.50 per unit3.00 per unit0.75 per unit1.50 per unit$100,000 for May40,000 for MaySales for June are expected to drop 40% below those of May to 15,000 units (25,000 x 60%). No significant changes areanticipated in the fixed costs or variable costs per unit. No extra costs will be incurred in discontinuing operations in theportion of the plant associated with solvent. The inventory of solvent at the beginning and end of June is not expected to besignificant (material). 1. Prepare an estimated income statement in absorption costing form for June for solvent, assuming that productioncontinues during the month.Income Statement Instructions12 (Label)3456789 (Label)10111213Celecia Industries Inc.Estimated Income Statement-Absorption Costing-Solvent(Label)

Absorption costing is compulsory under Generally Accepted Accounting Principles (GAAP) for financial…

Answered: 1. Prepare an estimated income…

1. Prepare an estimated income statement in absorption costing form for June for solvent, assuming that production continues during the month.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 2PA: The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped...

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The demand for solvent, one of numerous products manufactured byLogan Industries Inc., has dropped sharply because of recentcompetition from a similar product. The company's chemists arecurrently completing tests of various new formulas, and it is anticipatedthat the manufacture of a superior product can be started on November 1, one month in the future. No changes will be needed in the presentproduction facilities to manufacture the new product because only themixture of the various materials will be changed. The controller has been asked by the president of the company foradvice on whether to continue production during October or to suspendthe manufacture of solvent until November 1. The following data havebeen assembled: Logan Industries Inc.Income Statement-SolventFor the Month Ended September 30 Sales (10,000 units) .... ........Cost of goods soldGross profit . . .... ..Selling and administrative expenses...Operating loss . .. . . .. $ 800,000(770,000)$…
The demand for solvent, one of numerous products manufactured by Logan IndustriesInc., has dropped sharply because of recent competition from a similar product. Thecompany’s chemists are currently completing tests of various new formulas, and it isanticipated that the manufacture of a superior product can be started on November 1, onemonth in the future. No changes will be needed in the present production facilities tomanufacture the new product because only the mixture of the various materials will bechanged.The controller has been asked by the president of the company for advice on whether tocontinue production during October or to suspend the manufacture of solvent untilNovember 1. The following data have been assembled: REFER IMAGE The production costs and selling and administrative expenses, based on production of10,000 units in September, are as follows: Direct Materials $35 per unit Direct labor 24 per unit Variable manufacturing cost 8 per unit Variable selling and…
The demand for solvent, one of numerous products manufactured by Celecia 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 July 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 June or to suspend the manufacture of solvent until July 1. The following data have been assembled: Celecia Industries Inc. Income Statement—Solvent For the Month Ended May 31 1 Sales (25,000 units x $15 per unit) $375,000.00 2 Cost of goods sold (256,250.00) 3 Gross profit $118,750.00 4 Selling and…
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