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	$	8.00	$	37.00
Variable expenses per unit	$	2.20	$	12.00
Traceable fixed expenses per year	$	134,000	$	41,000

Common fixed expenses in the company total $101,000 annually. Last year the company produced and sold 37,500 units of Weedban and 21,000 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

	Total Company	Weedban	Greengrow
Sales	1,077,000	37,500 x 8 = 300,000	21,000 x 37 = 777,000
Variable cost	-334,500	37,500 x 2.20 = -82,500	21,000 x 12 = -252,000
Contribution margin	$742,500	$217,500	$525,000
Traceable fixed expense	-175,000	-134,000	-41,000
Segment margin	$567,500	$83,500	$484,000
Common fixed expense	-101,000
Net Operating Income	$466,500

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