Question

Exercise 6-4 Basic Segmented Income Statement [LO6-4]

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	$	9.00	$	32.00
Variable expenses per unit	$	2.80	$	13.00
Traceable fixed expenses per year	$	132,000	$	39,000

Common fixed expenses in the company total $102,000 annually. Last year the company produced and sold 40,500 units of Weedban and 20,000 units of Greengrow.

Answer 1

Contribution Format Income Statement
	Total	Weedban	Greengrow
Sales	1,004,500.00	364,500.00	640,000.00
Less: Variable expenses	373,400.00	113,400.00	260,000.00
Contribution margin	631,100.00	251,100.00	380,000.00
Less: Traceable fixed expenses	171,000.00	132,000.00	39,000.00
Product line segment margin	460,100.00	119,100.00	341,000.00
Less: Common fixed expenses
not traceable to products	102,000.00
Net operating income	358,100.00
Explanation
Sales:
Weedban: 40,500 units × $9.00 per unit = $364,500
Greengrow: 20,000 units × $32.00 per unit = $640,000
Variable expenses:
Weedban: 40,500 units × $2.80 per unit = $113,400
Greengrow: 20,000 units × $13.00 per unit = $260,000