PLEASE HELP ME WITH ANSWERS ONE AND TWO Soccer Ball Inc Soccer Ball Inc., a manu
ID: 2559482 • Letter: P
Question
PLEASE HELP ME WITH ANSWERS ONE AND TWO
Soccer Ball Inc Soccer Ball Inc., a manufacturer of youth soccer balls, prepared the income statement for the year ended December 31, 2016 (see Exhibit 1): Exhibit 1 Income Statement Sales (1888,000 units) Cost of sales Gross margin Delivery costs $9,440,000 5,664,000 $3,776,000 Containers Packing and Shipping Labor Freight $182,000 $438,000 $800,000 $1,420,000 Selling Costs Sales Manager Sales Salaries Commissions Sports Consortium Commissions Bad Debts 60,000 90,000 80,000 $70,000 30,000 330,000 Advertising Educational Media Sport Industry Media 120,000 90,000 General Business Support Operating Profit 210,000 $150,000 $1,666,000 The company sells soccer balls to schools, children's sports teams, and sporting goods stores which represents 4 segments. The selling price per unit is $5. The cost of sales is all variable Large public and private schools receive advertising through educational media, and place orders directly to the manufacturing plant. No sales Staff calls are made. Orders are received through the mail, fax, telephone or by computer. School districts arrange for their own delivery and send a truck to the plant to pick up orders when they are ready Smaller private schools located with 100 mile radius of then plant are visited by salesmen. These salesmen are paid commissions, and are not company employees. Sporting goods stores within a 400 miles radius of the plant are visited by 4 salesmen who are company employees and are paid a salary Children's sports teams within 600 miles radius of the plant are contacted through a sports consortium which sells to leagues. Advertising is done through sports industry media. The cost of that advertising is shared 50/50 with the sports consortium. The sports consortium receives a commission on their sales.Explanation / Answer
Soccer Ball, Inc.
Statement of Profitability for the period ended Dec 31, 2016
Sales (Unit sales *5)
2,960,000
1,120,000
3,840,000
1,520,000
9,440,000
COGS (Unit sales *3)
1,776,000
672,000
2,304,000
912,000
5,664,000
Gross Profit
1,184,000
448,000
1,536,000
608,000
3,776,000
Delivery Costs
Containers
52,000
23,000
81,000
26,000
182,000
Packaging & Shipping Labor
112,000
59,000
213,000
54,000
438,000
Freight
39,344
577,049
183,607
800,000
Total delivery costs
164,000
121,344
871,049
263,607
1,420,000
Selling Costs
Sales manager
18,814
7,119
24,407
9,661
60,000
Sales Salaries
90,000
90,000
Commissions
80,000
80,000
Sports Consortium Commissions
70,000
70,000
Bad debts
8,880
1,680
15,360
4,080
30,000
Total Selling Costs
27,694
88,799
129,767
83,741
330,000
Advertising
Education media
120,000
120,000
Sports Industry Media
90,000
90,000
Total Advertising costs
120,000
-
-
90,000
210,000
General Business Support
47,034
17,797
61,017
24,153
150,000
Operating Profit
825,273
220,060
474,167
146,500
1,666,000
Large Schools
Small Private Schools
Sporting Goods Stores
Sports teams sales
Total
Container Sales
Small cases
4,000
18,000
22,000
Medium Cases
8,000
5,000
15,000
2,000
30,000
Large Cases
7,000
5,000
12,000
15,000
9,000
33,000
7,000
64,000
Large Schools
Small Private Schools
Sporting Goods Stores
Sports teams sales
Total
Unit Sales (Container sales* Container size)
Small cases
-
64,000
288,000
-
352,000
Medium Cases
256,000
160,000
480,000
64,000
960,000
Large Cases
336,000
-
-
240,000
576,000
592,000
224,000
768,000
304,000
1,888,000
Notes:
Selling Price per unit - given $5
COGS per unit = 5664000/1,888,000 = $3
Allocation of costs:
Containers - Based on number of containers and rate per each type of container. For ex: For Large Schools - (8,000 containers*$3 per container)+(7,000 large containers*$4 per container) = $52,000
Packaging & Shipping Labor = Based on number of containers and rate per each type of container For Ex: Large schools - 8,000 containers*$7 per container)+(7,000 large containers*$8 per container) = $112,000
Freight: Allocated to Small private schools, Sporting goods stores and Sports teams. (Large schools pick up the inventory themselves)
Total Freight cost = 800,000
Sales Manager is allocated based on number of units sold
Sales thru salesman who are paid salaries, fully allocated to Sporting goods stores
Sales thru salesman who are paid only Commissions fully allocated to Small schools
Sales are thru Consortium only to sports teams, hence fully allocated to Sports teams
Bad debts allocated based on % given - Sales * given % for each type of customer
Education media advertising is used only for Large schools, hence entire cost is allocated here
Sports Industry media advertising is used only for Sports teams, hence entire cost is allocated here
General Business support based on number of units sold
Partial Statement of Income for each container size
Small cases
Medium Cases
Large Cases
Total
Number of Containers sold
22,000
30,000
12,000
64,000
Number of units in each container
16
32
48
Number of Units sold
352,000
960,000
576,000
1,888,000
Sales
1,760,000
4,800,000
2,880,000
9,440,000
COGS
1,056,000
2,880,000
1,728,000
5,664,000
Gross Profit
704,000
1,920,000
1,152,000
3,776,000
Soccer Ball, Inc.
Statement of Profitability for the period ended Dec 31, 2016
Sales (Unit sales *5)
2,960,000
1,120,000
3,840,000
1,520,000
9,440,000
COGS (Unit sales *3)
1,776,000
672,000
2,304,000
912,000
5,664,000
Gross Profit
1,184,000
448,000
1,536,000
608,000
3,776,000
Delivery Costs
Containers
52,000
23,000
81,000
26,000
182,000
Packaging & Shipping Labor
112,000
59,000
213,000
54,000
438,000
Freight
39,344
577,049
183,607
800,000
Total delivery costs
164,000
121,344
871,049
263,607
1,420,000
Selling Costs
Sales manager
18,814
7,119
24,407
9,661
60,000
Sales Salaries
90,000
90,000
Commissions
80,000
80,000
Sports Consortium Commissions
70,000
70,000
Bad debts
8,880
1,680
15,360
4,080
30,000
Total Selling Costs
27,694
88,799
129,767
83,741
330,000
Advertising
Education media
120,000
120,000
Sports Industry Media
90,000
90,000
Total Advertising costs
120,000
-
-
90,000
210,000
General Business Support
47,034
17,797
61,017
24,153
150,000
Operating Profit
825,273
220,060
474,167
146,500
1,666,000
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