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	$	35.00
Variable expenses per unit	$	3.00	$	10.00
Traceable fixed expenses per year	$	135,000	$	48,000

Common fixed expenses in the company total $107,000 annually. Last year the company produced and sold 39,000 units of Weedban and 20,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

	Product Line
	Total Company	Weedban	Greengrow
Sales	922,500	20,500 x 10 = 205,000	20,500 x 35 = 717,500
Variable expenses	-266,500	20,500 x 3 = 61,500	20,500 x 10 = 205,000
Contribution margin	656,000	143,500	512,500
Traceable fixed expenses	-183,000	-135,000	-48,000
Segment margin	473,000	8,500	464,500
Common fixed expenses	-107,000
Net operating income	366,000

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