Question

Information pertaining to Luigi Co. is as follows:

Sales
Variable cost of goods sold Direct fixed overhead

Fleece Blanket

$425,000 124,000 29,000

Thermal Blanket

$524,000 213,000 36,000

A sales commission of 3% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $32,000 for the fleece blankets and $66,000 for the thermal blankets. Common fixed overhead for the factory was estimated to be $83,000 and common selling and administrative expense was estimated to be $14,000.

Required: Prepare a segmented income statement for Luigi Co. for the coming year, using variable costing.

Answer 1

Segmented Income Statement
	Fleece Blanket	Thermal Blanket	Total
Sales (a)	$425,000.00	$524,000.00	$949,000.00
Less: Variable Expense
Variable cost of Goods Sold	$124,000.00	$213,000.00	$337,000.00
Variable Sales Comission (aX3%)	$12,750.00	$15,720.00	$28,470.00
Total Variable Expense	$136,750.00	$228,720.00	$365,470.00
Contribution	$288,250.00	$295,280.00	$583,530.00
Less: Fixed Expense
Direct Fixed Overhead	$29,000.00	$36,000.00	$65,000.00
Fixed Selling & Admin. Expense	$32,000.00	$66,000.00	$98,000.00
Total Fixed Expense	$61,000.00	$102,000.00	$163,000.00
Net Income	$227,250.00	$193,280.00	$420,530.00