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 $ 33.00 Variable expenses per unit $ 2.50 $ 14.00 Traceable fixed expenses per year $ 136,000 $ 39,000 Common fixed expenses in the company total $110,000 annually. Last year the company produced and sold 38,000 units of Weedban and 16,000 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines.

Answer 1

Income statement
Particulars	Total	Weedban	Greengrow
Number of units (A)		38,000	16,000
Selling price per unit (B)		$11	$33
Sales (A x B)	$946,000	$418,000	$528,000
Less: Variable expenses ($2.50 per unit for Weedban and $14 per unit for Greengrow)	$319,000	$95,000	$224,000
Contribution margin	$627,000	$323,000	$304,000
Less: Traceable fixed expenses	$175,000	$136,000	$39,000
Product line segment margin	$452,000	$187,000	$265,000
Less: Common fixed expense not traceable to products	$110,000
Net operating income	$342,000