Question

For the coming year, Paulson Computers Inc. expects to produce 144,000 computers. Of these, 64,000 will be consumer (personal) computers and 80,000 will be small business computers. Common fixed overhead is $1,700,700. Additional information for the coming year is as follows:

	Consumer	Small Business
	Computers	Computers
Price	$ 643	$ 1,676
Unit direct materials	490	1,179
Unit direct labor	90	312
Unit variable overhead	22	49
Unit variable selling expense	35	66
Total direct fixed overhead	120,000	350,100

Fixed selling and administrative expense for Paulson Computers is $2,959,700 per year.

Labels
Add common fixed expenses
Add direct fixed expenses
Add variable expenses
Less common fixed expenses
Less direct fixed expenses
Less variable expenses
Amount Descriptions
Common fixed overhead
Common selling and administrative
Contribution margin
Direct fixed overhead
Direct selling and administrative
Operating loss
Operating income
Sales
Segment margin
Variable cost of goods sold
Variable selling expense

1(a) Calculate the unit variable cost under variable costing.

•	Consumer computers: ____unit variable cost
•	Small business computers: ____unit variable cost

2. Prepare a segmented variable-costing income statement for next year. The segments correspond to product lines: consumer computers and small business computers. Refer to the list of Labels and Amount Descriptions for the exact wording of text items within your income statement. If an amount is negative, first enter a minus sign (-).

Paulson Computers Inc.

Segmented Variable-Costing Income Statement

For the Coming Year

1		Consumer Computers	Small Business Computers	Total
2
3
4
5
6
7
8
9
10
11
12
13

Answer 1

1(a)

Consumer computers: $602 unit variable cost

Small business computers: $1540 unit variable cost

	Consumer Computers	Small Business Computers
Unit direct materials	490	1179
Unit direct labor	90	312
Unit variable overhead	22	49
Unit variable cost $	602	1540

2.

Paulson Computers Inc.
Segmented Variable-Costing Income Statement
For the Coming Year
	Consumer Computers	Small Business Computers	Total
Sales $	41152000	134080000	175232000
Less variable expenses
Variable cost of goods sold	38528000	123200000	161728000
Variable selling expense	2240000	5280000	7520000
Contribution margin	384000	5600000	5984000
Less direct fixed expenses
Direct fixed overhead	120000	350100	470100
Segment margin	264000	5249900	5513900
Less common fixed expenses
Common fixed overhead			1700700
Common selling and administrative			2959700
Operating income $			853500