Question

Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Selling price per unit Variable expenses per unit Traceable fixed expenses per year Product Weedban Greengrow $ 9.00 $ 37.00 $ 2.20 $ 14.00 $ 129,000 $ 38,000 Common fixed expenses in the company total $105,000 annually. Last year the company produced and sold 36,000 units of Weedban and 22,500 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines. Product Line Total Company Weedban Greengrow 0 0 0 0 $ 0 $ 0 $ 0

Answer 1

Part 1

	Product Line
	Total Company	Weedban	Greengrow
Sales	1,156,500	36,000 x 9 = 324,000	22,500 x 37 = 832,500
Variable expenses	-394,200	36,000 x 2.20 = -79,200	22,500 x 14 = -315,000
Contribution margin	762,300	244,800	517,500
Traceable fixed expenses	-167,000	-129,000	-38,000
Segment margin	595,300	115,800	479,500
Common fixed expenses	-105,000
Net operating income	490,300

Part 2

Calculation of Unit Product Cost under Absorption Costing
Direct materials	220
Direct labor	340
Variable manufacturing overhead	63
Fixed manufacturing overhead ( 630,000/15,000)	42
Unit product cost	$665

Calculation of Unit Product Cost under Variable Costing
Direct materials	220
Direct labor	340
Variable manufacturing overhead	63
Unit product cost	$623

1.	Absorption costing unit product cost	$665
2.	Variable costing unit product cost	$756

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