Question

Question 4 (21 marks) Haha Electronic Limited manufactures and sells two electronic equipments, EQ and SEQ, in Hong Kong. The revenue and cost information of the company's products are as follows: Products EQ SEQ Selling price per unit $18.0 $42.0 $28.0 Variable expenses per unit $12.0 Traceable fixed expenses per year $113,000 $94,000 Common fixed expenses in the company total $123,500 yearly. Last year Haha Electronic Limited produced and sold 17,200 EQ and 34,800 SEQ. Required: Prepare a contribution format income statement for the year segmented by product lines. (25 marks)

Answer 1

The contribution margin income statement for the year is shown as follows:-

	EQ	SEQ	Total Company
Sales	722,400 (17,200*$42)	626,400 (34,800*$18)	1,348,800
Variable Costs	(481,600) (17,200*$28)	(417,600) (34,800*$12)	(899,200)
Contribution Margin	240,800	208,800	449,600
Traceable Fixed Expenses	(113,000)	(94,000)	(207,000)
Segmented income/(Loss)	127,800	114,800	242,600
Common Fixed Expenses			(123,500)
Net Income			119,100

Therefore net income for the company as whole is $119,100.

Note 1) Common fixed expense will be deducted from total segment income (i.e. after adding segmented income of each product).