Exercise 7-4 Basic Segmented Income Statement L07-4] Royal Lawncare Company prod

Question

Exercise 7-4 Basic Segmented Income Statement L07-4] Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Selling price per unit Variable expenses per unit Traceable fixed expenses per year Weedban Greengrow $ 12.00 33.00 $ 2.60 11.00 134,00 49,000 Common fixed expenses in the company total $110,000 annually. Last year the company produced and sold 38,000 units of Weedban and 16,500 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines. Product Line Total Company WeedbanGreengrow

Explanation / Answer

Solution: Total Company Weedban Greengrow Sales 1,000,500 456,000 544,500 Variable expenses 280,300 98,800 181,500 Contribution margin 720,200 357,200 363,000 Traceable fixed expenses 183,000 134,000 49,000 Product line segment margin 537,200 223,200 314,000 Common fixed expenses not traceable to products 110,000 Net operating income 427,200 Working Notes: I = II + III II III Total company Weedban Greengrow a Sales 1,000,500 456,000 544,500 [units x selling price] [units x selling price] [38,000 x $12 ] [16,500 x $33 ] b Variable expenses 280,300 98,800 181,500 [units x variable exp. Per unit] [units x variable exp. Per unit] [38,000 x $2.6 ] [16,500 x $11 c=a-b Contribution margin 720,200 357,200 363,000 d Traceable fixed expenses 183,000 134,000 49,000 e=c-d Product line segment margin 537,200 223,200 314,000 f=given Common fixed expenses not traceable to products 110,000 g=e-f Net operating income 427,200 Please feel free to ask if anything about above solution in comment section of the question.

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