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	$	10.00	$	37.00
Variable expenses per unit	$	2.80	$	12.00
Traceable fixed expenses per year	$	130,000	$	34,000

Last year the company produced and sold 36,000 units of Weedban and 15,500 units of Greengrow. Its annual common fixed expenses are $114,000.

Required:

Prepare a contribution format income statement segmented by product lines.

	Product Line Total Company Weedban Greengrow

Answer 1

Product Line Total Company 933500 286800 Weedban 360000 100800 Greengrow 573500 186000 259200 Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income 646700 164000 387500 34000 130000 129200 353500 482700 114000 368700

Explanation: Contribution margin = Sales - Variable expenses Total company sales = Weedban sales + Greengrow sales Weedban sales = 36000 * $10 = 360 000 Greengrow sales 15500 * $37 = 573 500 Variable expenses : Weedban : 36000 * $2.80 = 100 800 Greengrow : 15500 * $12.00 = 186 000 Segment margin = Contribution margin - Traceable fixed expenses Net operating Income = Segment margin - Common fixed expenses