Question

Exercise 22.5 Preparing a Responsibility Income Statement (LO22-1, LO22-2, LO22-3, LO22-4, LO22-5)

Hepras, Inc., has two product lines: routers and ethernet switches. During the current month, the two product lines reported the following results.

	Routers				Switches
Sales	$	900,000			$	300,000
Variable costs (as a percentage of sales)		40	%			60	%
Traceable fixed costs	$	200,000			$	100,000

  

In addition, fixed costs common to both product lines amounted to $120,000.

Prepare an income statement showing percentages as well as dollar amounts. Conclude your statement with income from operations for the business and with the responsibility margin for each product line. (Round your percentage answers to the nearest whole percent.)

Answer 1

			All amounts in $
				Product Lines
	Hepras, Inc.,	Routers			Ethernet switches.
	Dollars	%	Dollars	%		Dollars	%
Sales	1200000		900000			300000
Variable Cot	540000	45	360000	40.0		180000	60
Contribution Margin	660000	55	540000	60.0		120000	40
Fixed Cost Tracable	300000		200000			100000
Division Responsibility Margin	360000	30	340000	38.0		20000	7
Common Fixed Cost	120000
Income From Operation	240000	20