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 Selling price per unit $ 6.00 $ 7.50 Variable expenses per unit $ 2.40 $ 5.25 Traceable fixed expenses per year $ 45,000 $ 21,000 Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines.

Answer 1

Answer:

$\left[\begin{array}{ccCc}& Weedban& Greengrow& Total\\ Sales&90,000&210,000&300,000\\ Variable&-36,000&-147,000&-183,000\\ Traceable Fixed&-45,000&-21,000&-66,000\\ Business Fixed Cost&&&-33,000\\ Income&9,000&42,000&18,000\\\end{array}\right]$

Explanation:

$\left[\begin{array}{ccCc}& Weedban& Greengrow& Total\\ Sales&90,000&210,000&300,000\\ Variable&-36,000&-147,000&-183,000\\ Traceable Fixed&-45,000&-21,000&-66,000\\ Business Fixed Cost&&&-33,000\\ Income&9,000&42,000&18,000\\\end{array}\right]$

We will multiply the sales price by the production of each segment

Then, we do the same for the variable cost

Next, we write the traceable fixed cost

On the total we post the common fixed cost

finally the income per segment and for the company as a whole.

Answer 2

Answer:

                       ROYAL LAWNCARE COMPANY

      Contribution Income Statement as at December 31, 2018

                           Weedban           Greengrow                  Total

                               $                                $                           $

Revenue                90,000                  210,000              300,000

Less: Variable

         Expenses      (36,000)                (147,000)             (183,000)

Contribution           54,000                   63,000             117,000

Less: Traceable

fixed expenses       (45,000)                  (21,000)              (66,000

Profit before              

Allocated expenses    9,000                   42,000              51,000

Allocation of  Common

Fixed Expenses      (11,511.63)                  (21,488.37)       (33,000)  

Net Profit(Loss)       (2,511.63)                 21,511.63       18,000

Explanation:

Calculations:

1. Sales Revenue:

Weedban=15,000*$6.00=$90,000

Greengrow=28,000*$7.50= $210,000

    2. Variable Expenses

Weedban=15,000*$2.40=$36,000

Greengrow=28,000*$5.25= $147,000

Contribution=Sales Revenue-Variable expense

3. Allocation of  Common

Fixed Expenses      

Weedban=(15,000/43,000)* 33,000=$11,511.63

Greengrow=(28,000/43,000)*33,000=$21,488.37

Total                                                        $33,000.00

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