Royal Lawncare Company produces and sells two packaged products, Weedban and Gre
ID: 2431222 • Letter: R
Question
Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow $ 12.00 34.00 $ 2.80 $ 10.00 Traceable fixed expenses per year $130,000 $47,000 Selling price per unit Variable expenses per unit Common fixed expenses in the company total $95,000 annually. Last year the company produced and sold 41,500 units of Weedban and 15,500 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines Product Line Total Company Weedban GreengrowExplanation / Answer
Royal Lawrence Company
Income Statement
Product Line
Details
Total
Weedband
Greengrow
Sales
$ 1,025,000.00
$ 498,000.00
$ 527,000.00
Variable Cost
$ 271,200.00
$ 116,200.00
$ 155,000.00
Contribution margin
$ 753,800.00
$ 381,800.00
$ 372,000.00
Traceable Fixed cost
$ 177,000.00
$ 130,000.00
$ 47,000.00
Income Before Common Fixed Cost
$ 576,800.00
$ 251,800.00
$ 325,000.00
Common Fixed Cost
$ 95,000.00
Net income
$ 481,800.00
1)
Wintage Company
Income Statement
Division
Total Company
East
Central
West
Sales
$ 1,599,000.00
$ 389,000.00
$ 670,000.00
$ 540,000.00
Variable Cost
$ 611,740.00
$ 178,940.00
$ 254,600.00
$ 178,200.00
Contribution margin
$ 987,260.00
$ 210,060.00
$ 415,400.00
$ 361,800.00
Traceable Fixed cost
$ 793,000.00
$ 264,000.00
$ 328,000.00
$ 201,000.00
Income Before Common Fixed Cost
$ 194,260.00
$ (53,940.00)
$ 87,400.00
$ 160,800.00
Common Fixed Cost
$ 293,000.00
Net income
$ (98,740.00)
2a)
Wintage Company
Income Statement
(increase in sales of West division by 10% )
Division
Total Company
East
Central
West
Sales
$ 1,653,000.00
$ 389,000.00
$ 670,000.00
$ 594,000.00
Variable Cost
$ 629,560.00
$ 178,940.00
$ 254,600.00
$ 196,020.00
Contribution margin
$ 1,023,440.00
$ 210,060.00
$ 415,400.00
$ 397,980.00
Traceable Fixed cost
$ 818,000.00
$ 264,000.00
$ 328,000.00
$ 226,000.00
Income Before Common Fixed Cost
$ 205,440.00
$ (53,940.00)
$ 87,400.00
$ 171,980.00
Common Fixed Cost
$ 293,000.00
Net income
$ (87,560.00)
Incremental Net Operating Income
(171980-160800)
$ 11,180.00
2b)
Yes
Increase in Advertisement will increase Operating income by $11180. Although the Overall net operating income is still a negative value but there is decrease in loss due to additional advertisement and increased sales.
Royal Lawrence Company
Income Statement
Product Line
Details
Total
Weedband
Greengrow
Sales
$ 1,025,000.00
$ 498,000.00
$ 527,000.00
Variable Cost
$ 271,200.00
$ 116,200.00
$ 155,000.00
Contribution margin
$ 753,800.00
$ 381,800.00
$ 372,000.00
Traceable Fixed cost
$ 177,000.00
$ 130,000.00
$ 47,000.00
Income Before Common Fixed Cost
$ 576,800.00
$ 251,800.00
$ 325,000.00
Common Fixed Cost
$ 95,000.00
Net income
$ 481,800.00
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