Question

Exercise 7-4 Basic Segmented Income Statement [LO7-4]

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	$	11.00	$	31.00
Variable expenses per unit	$	2.80	$	15.00
Traceable fixed expenses per year	$	132,000	$	40,000

Common fixed expenses in the company total $100,000 annually. Last year the company produced and sold 40,000 units of Weedban and 23,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

	Total	Weedban	Greengrow
Sales	1,168,500	(40,000*11) = 440,000	(23,500*31) = 728,500
Variable costs	464,500	(40,000*2.80) = 112,000	(23,500*15) = 352,500
Contribution margin	704,000	328,000	376,000
Traceable fixed expenses	172,000	132,000	40,000
Product line segment margin	532,000	196,000	336,000
Common fixed expenses	100,000
Net operating income	432,000