Homework Sourse5 Royal Lawncare Company produces and sells two packaged pro
Solution
Step 1 of 7
Compute the amount of sales for Product W for preparing the contribution format income statement.
Compute the amount of sales for Product W as given below.
Amount of sales = Selling price per unit*units sold
= $11.00*38,000units
= $418,000
Sales are the main revenue of the organization. The units sold during the period which is 38,000 units are multiplied by the selling price per unit of $11 per unit in order to determine the amount of sales which is $418,000.
Step 2 of 7
Compute the amount of sales for Product G for preparing the contribution format income statement.
Compute the amount of sales for Product G as given below.
Amount of sales = Selling price per unit*units sold
= $32.00*19,000units
= $608,000
Sales are the main revenue of the organization. The units sold during the period which is 19,000 units are multiplied by the selling price per unit of $32 per unit in order to determine the amount of sales which is $608,000.
Step 3 of 7
Compute the amount of variable expenses for Product W for preparing the contribution format income statement.
Compute the amount of variable expenses for Product W as given below.
Amount of variable expenses = Variable expenses per unit*units sold
= $2.70*38,000units
= $102,600
Variable expenses are the expense directly related to the product. The expenses which can be directly traceable to the product are included in the variable expenses. The units sold during the period of Product W which is 38,000 units are multiplied by the variable cost per unit of $2.70 in order to determine the amount of variable expenses which is $102,600.
Step 4 of 7
Compute the amount of variable expenses for Product G for preparing the contribution format income statement.
Compute the amount of variable expenses for Product G as given below.
Amount of variable expenses = Variable expenses per unit*units sold
= $13*19,000units
= $247,000
Variable expenses are the expense directly related to the product. The expenses which can be directly traceable to the product are included in the variable expenses. The units sold during the period of Product G which is 19,000 units are multiplied by the variable cost per unit of $13 in order to determine the amount of variable expenses which is $247,000.
Step 5 of 7
Use the amount of sales and variable expenses in order to prepare the contribution format income statement for Product W Company R.
Company R
Contribution format Income Statements (Amount in $)
Particulars
Product W
Sales
4,18,000
Variable expenses
1,02,600
Contribution margin
3,15,400
Traceable fixed expenses
1,32,000
Product line segment margin
1,83,400
Working notes:
Compute the value of contribution margin of Product W as given below:
Contribution margin = Sales-Variable expenses
= $418,000-$102,600
= $315,400
Compute the value of product line segment margin of Product W as given below:
Product line segment margin = Contribution – Fixed expenses
= $315,400-$132,000
= $183,400
Product line segment margin of Product W Company R is $183,400.
The product line segment margin of Company R for Product W is computed by reducing the fixed expense of $132,000 from contribution margin of $315,400. The result is $183,400. The contribution margin is computed by deducting the value of variable expenses of $102,600 from the value of sales which is $418,000. The result is $315,400.
Step 6 of 7
Use the amount of sales and variable expenses in order to prepare the contribution format income statement for Product G Company R.
Company R
Contribution format Income Statements (Amount in $)
Particulars
Product G
Sales
6,08,000
Variable expenses
2,47,000
Contribution margin
3,61,000
Traceable fixed expenses
39,000
Product line segment margin
3,22,000
Working notes:
Compute the value of contribution margin of Product G as given below:
Contribution margin = Sales- Variable expenses
= $608,000-$247,000
= $361,000
Compute the value of product line segment margin of Product G as given below:
Product line segment margin = Contribution-Fixed expenses
= $361,000-$39,000
= $322,000
Product line segment margin of Product G Company R is $322,000.
The product line segment margin of Company R for Product G is computed by reducing the fixed expense of $39,000 from contribution margin of $361,000. The result is $322,000.
The contribution margin is computed by deducting the value of variable expenses of $247,000 from the value of sales which is $608,000. The result is $361,000.
Step 7 of 7
Prepare contribution format combining the details of both the products of Company R.
Company R
Contribution format Income Statements (Amount in $)
Particulars
Total Company
Product W
Product G
Sales
10,26,000
4,18,000
6,08,000
Variable expenses
3,49,600
1,02,600
2,47,000
Contribution margin
6,76,400
3,15,400
3,61,000
Traceable fixed expenses
1,71,000
1,32,000
39,000
Product line segment margin
5,05,400
1,83,400
3,22,000
Common fixed expenses not traceable to products
1,04,000
Net operating income
4,01,400
Working notes:
Compute total sales of Company R as given below:
Sales = Sales of Product W + Sales of Product G
= $418,000+$608,000
= $1,026,000
Compute variable expenses of Company R as given below:
Total variable expenses = Variable expenses of Product W +Variable expenses of Product G
= $102,600+$247,000
= $349,600
Compute contribution margin of Company R as given below:
Total Contribution margin = Total Sales – Total Variable expenses
= $1,026,000-$349,600
= $676,400
Compute total fixed expenses of Company R as given below:
Total Fixed expenses = Fixed expenses of Product W+ Fixed expenses of Product G
=$132,000+$39,000
= $171,000
Compute product line segment margin of Company R as given below:
Total Product line segment margin =
Product line segment margin of Product W +Product line segment margin of Product G
= $183,400+$322,000
=$505,400
Compute net income of Company R as given below:
Net Income = Total product line segment margin – Common fixed expenses
=$505,400-$104,000
$401,400
Net operating income of Company R is $401,400.
| Company R | |
| Contribution format Income Statements (Amount in $) | |
| Particulars | Product W |
| Sales | 4,18,000 |
| Variable expenses | 1,02,600 |
| Contribution margin | 3,15,400 |
| Traceable fixed expenses | 1,32,000 |
| Product line segment margin | 1,83,400 |
