Question

Information pertaining to Luigi Co. is as follows:

Sales
Variable cost of goods sold Direct fixed overhead

Fleece Blanket

$425,000 124,000 29,000

Thermal Blanket

$524,000 213,000 36,000

A sales commission of 3% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $32,000 for the fleece blankets and $66,000 for the thermal blankets. Common fixed overhead for the factory was estimated to be $83,000 and common selling and administrative expense was estimated to be $14,000.

Required: Prepare a segmented income statement for Luigi Co. for the coming year, using variable costing.

Answer 1

Answer-

LUIGI CO.
CONTRIBUTION FORMAT SEGMENTED INCOME STATEMENT
USING VARIABLE COSTING
PARTICULARS	FLEECE BLANKET	THERMAL BLANKET	TOTAL COMPANY
	$	$	$
Sales(a)	425000	524000	949000
Less - Variable expenses
Cost of goods sold	124000	213000	337000
Sales commissions @ 3%	12750	15720	28470
Total variable expenses (b)	136750	228720	365470
Contribution margin (c=a-b)	288250	295280	583530
Traceable fixed expenses
Direct overhead	29000	36000	65000
Selling & administrative expenses	32000	66000	98000
Total traceable fixed expenses (d)	61000	102000	163000
Product line segment margin (e=c-d)	227250	193280	420530
Less- Common fixed expenses
Direct overhead			83000
Selling & administrative expenses			14000
Total common fixed expenses (f)			97000
Net income (g= e-f)			323530