prepare an income statement for the past year in the variabl

PR 6-5B Variable costing income statement and effect on income of change in operations Obj. 4 v3. Income from Kimbrell Inc. manufactures three sizes of utility tables -small (S), medium (M, and lge (L) operations, $106,820 The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (I) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. XCEL TEMPLATE Continued)

Solution

Income statement Particulars S M L Total Sales            9,90,000       10,87,500        9,45,000          30,22,500 Minus: Variable costs            6,56,600         8,27,250        6,52,050          21,35,900 Contribution margin            3,33,400         2,60,250        2,92,950            8,86,600 Minus: Fixed costs            2,73,125         3,30,525        2,64,250            8,67,900 Net operating income                60,275           (70,275)            28,700                18,700 workings Particulars S M L Total Variable costs cost of goods sold            5,38,500         7,18,500        5,67,000          18,24,000 operating expenses            1,18,100         1,08,750            85,050            3,11,900 Total variable costs            6,56,600         8,27,250        6,52,050          21,35,900 Fixed costs cost of goods sold            2,41,000         2,88,000        2,50,000            7,79,000 operating expenses                32,125            42,525            14,250                88,900 Total fixed costs            2,73,125         3,30,525        2,64,250            8,67,900