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	$	11.00	$	34.00
Variable expenses per unit	$	2.30	$	10.00
Traceable fixed expenses per year	$	138,000	$	44,000

Common fixed expenses in the company total $106,000 annually. Last year the company produced and sold 44,500 units of Weedban and 18,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

	Product Line
	Total Company	Weedban	Greengrow
Sales	1,118,500	44,500 x 11 = 489,500	18,500 x 34 = 629,000
Variable expenses	-287,350	44,500 x 2.30 = - 102,350	18,500 x 10 = -185,000
Contribution margin	831,150	387,150	444,000
Traceable fixed expenses	-182,000	-138,000	-44,000
Segment margin	649,150	249,150	400,000
Common fixed expenses	-106,000
Net operating income	543,150

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