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

ROYAL LAWNCARE COMPANY
Contribution Format Income Statement
	Total	Weedban	Greengrow
Sales	300,000.00	90,000.00	210,000.00
Less: Variable expenses	183,000.00	36,000.00	147,000.00
Contribution margin	117,000.00	54,000.00	63,000.00
Less: Traceable fixed expenses	66,000.00	45,000.00	21,000.00
Profit before Allocated expenses	51,000.00	9,000.00	42,000.00
Less: Allocation of Common
Fixed Expenses	33,000.00	11,511.63	21,488.37
Net operating income (Loss)	18,000.00	(2,511.63)	20,511.63
Explanation
Sales:
Weedban: 15,000 units × $6.00 per unit = $90,000
Greengrow: 28,000 units × $7.50 per unit = $210,000
Variable expenses:
Weedban: 15,000 units × $2.40 per unit = $36,000
Greengrow: 28,000 units × $5.25 per unit = $147,000
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