Answer:
Contribution is sales revenue less variable cost. In multiple products environment, it is important that the producer have information about the performance of each product. This is useful for decision making purpose. See income statement below
Explanation:
An income statement showing contribution would suffice:
Royal Lawrence Company
Income statement
Weedban Greengrow Total
$ $ $
Sales (sp/unit × unit) 315,000 900,000 1,215,000
Variable cost (Vc/unit × units) (<u>98,000)</u> (<u>325,000)</u> (<u>423,000)</u>
Contribution 217,000 575,000 792,000
Specific fixed cost <u> (132,000)</u> <u> (37,000) </u> <u>(169,000)</u>
Product profit 85,000 538,000 623,000
Common Fixed cost <u>(100,000)</u>
Total profit <u>523,000 </u>
