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Check My Work a. 1. Recall that under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead. Calculate unit cost for direct materials, direct labor, variable factory overhead, fixed tactory overhead. Add together to get total unit cost. For 28,800 unis, use the same unit costs for direct materials, direct labor, and variable overhead, but instead recalculate the foced factory overhead and add this to obtain the unit cost at the 28 , 800 unit lavet. Sales - (Cost of goods marufactured inventory, January 31) = Gross proft, Gross profit - Selling and administrative expenses = income from operations. Remember that the inventory. January 31 adjustment wil only be necessary at the 28,800 level 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: The company is evaluating a proposal to manufacture 28,8 (t) units instead of 25,600 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 25,600 and 28,800 units are manufactured in the absorption costing format. If an amount box does not require an entry leave it blank. a. 2. Prepare an estimated income statement, comparing operating results if 25,600 and 28,800 units are manufactured in the variable costing format. If an amount box does not require an entry leave it blank

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