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 $ 35.00 Variable expenses per unit $ 2.20 $ 11.00 Traceable fixed expenses per year $ 132,000 $ 49,000 Last year the company produced and sold 41,500 units of Weedban and 24,000 units of Greengrow. Its annual common fixed expenses are $113,000. Required: Prepare a contribution format income statement segmented by product lines.

Answer 1

Answer:

The net profits are as follows:

Total Company = $647,200

Weedban = $161,605

Greengrow = $485,595

Explanation:

Note: See the attached excel for the contribution format income statement segmented by product lines.

In the attached excel file, the following formula is used:

Allocation of common fixed expenses to Weedban = (Units of Weedban / (Units of Weedban + Units of Greengrow)) * Common fixed expenses = (41,500 / (41,500 + 24,000) * $113,000 = $71,595

Allocation of common fixed expenses to Greengrow = (Units of Greengrow / (Units of Weedban + Units of Greengrow)) * Common fixed expenses = (24,000 / (41,500 + 24,000) * $113,000 = $41,405

From the attached excel file, the net profits are as follows:

Total Company = $647,200

Weedban = $161,605

Greengrow = $485,595