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	$	39.00
Variable expenses per unit	$	2.40	$	14.00
Traceable fixed expenses per year	$	129,000	$	39,000

Common fixed expenses in the company total $111,000 annually. Last year the company produced and sold 39,000 units of Weedban and 17,500 units of Greengrow.

Required:

Prepare a contribution format income statement segmented by product lines.

Answer 1

	Contribution Format Income Statement
		Total	Weedban	Greengrow
	Sales	1,111,500.00	429,000.00	682,500.00
	Less: Variable expenses	338,600.00	93,600.00	245,000.00
	Contribution margin	772,900.00	335,400.00	437,500.00
	Less: Traceable fixed expenses	168,000.00	129,000.00	39,000.00
	Product line segment margin	604,900.00	206,400.00	398,500.00
	Less: Common fixed expenses
	not traceable to products	111,000.00
	Net operating income	493,900.00
	Explanation
1	Sales:
	Weedban: 39,000 units × $11.00 per unit = $429,000
	Greengrow: 17,500 units × $39.00 per unit = $682,500
2	Variable expenses:
	Weedban: 39,000 units × $2.40 per unit = $93,600
	Greengrow: 17,500 units × $14.00 per unit = $245,000