Professional Documents
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14080694037
S1AK14 A
$35
$65
$30
$20
$150
= $150 x 14,000
= $2,100,000
$35
$65
$30
$130
$2,800,000
$2,100,000
$700,000
$200,000
Net Income
$500,000
$2,800,000
$1,680,000
$980,000
$340,000
$200,000
$540,000
$440,000
Trendy Inc.
Segmented Income Statement
For the Coming Year
Sales
Sweaters
Jackets
Total
$300,000
$420,000
$720,000
($180,000)
($200,000)
($380,000)
($15,000)
($21,000)
($36,000)
$105,000
$199,000
$304,000
($25,000)
($40,000)
($65,000)
($20,000)
($50,000)
($70,000)
$60,000
$109,000
$169,000
Contribution margin
Less fixed expenses :
Segment Margin
($45,000)
($15,000)
Operating Income
$109,000
$2.45
$2.10
$0.25
$0.30
$0.9
$6
Total Cost
= 3,300 x $6
= $19,800
$1,872,000
$1,248,000
$624,000
$56,000
$568,000
$5.1
Variable costing stresses the difference between fixed and variable manufacturing costs.
Variable costing assigns only variable manufacturing costs to the product; these costs
include direct material, direct labor, and variable overhead. Fixed overhead is treated as
period expenses and is excluded from product cost. The rarionale for this treatment is that
fixed overhead is a cost of capacity, or staying in bussines. Once the period is over. Any
benefits provided by capacity have expired an shouldn`t be inventoried. Under variable
costing, fixed overhead of a period is seen as expiring that period and is charged in total
against the revenues of the period.
Spider Company
Variable-Costing Income Statement
Sales ($9 x 208,000)
Less :
Variable Cost of goods sales ($5.1 x 208,000)
Gross margin
Less :
Fixed Overhead
$180,000
Selling and administrative expenses
Operating Income
$1,872,000
$1,060,800
$811,200
$56,000
$575,200
$1,770,300
$1,180,200
$590,100
$56,000
$534,100
$1,872,000
$1,060,800
$811,200
$180,000
$56,000
$575,200
= $3
Ending Inventory = Units Produced Units Sold
= 55,000 53,500
= 1,500
= $3 x 1,500
= $4,500
2. Cost of SUGARSMOOTH`s ending Inventory in the first year under Variable costing :
Cost of goods sold
= Absorption unit product cost X Unit sold
$160,500
= Absorption unit product cost X 53,500
$ 160,500
Absorption unit product cost
=
53,500
Absorption unit product cost
= $3
= $2.5 x 1,500
= $3,750
Sugarsmooth Inc.
Variable-Costing Income Statement
Sales (53,500 x $8.50)
Less :
Variable Cost of goods sold ($2.5 x 53,500)
Gross margin
Less :
Fixed Overhead
Selling and administrative expenses
Operating Income
$454,750
$133,750
$321,000
$27,500
$120,000
$147,500
$173,500
Discount Stores
Beauty Shop
Total
Sales
Variable cost of
goods sold
Contribution Margin
$199,750
$135,000
$90,000
$424,750
$11,750
$188,000
$10,000
$125,000
$5,000
$85,000
$26,750
$398,000
$9,000
$5,000
$71,000
$45,000
$30,000
$9,000
$5,000
$309,000
Operating Income
$45,000
$30,000
$50,000
$1,350
$188,000
$51,350
$1,350
$71,000
$310,350
($27,500)
($120,000)
$162,850
4. Yes, all the customer group are profitable, Drugstore with $188,000 Income, Discounted
Store with $51,350 Income, and Beauty Shop with $71,000 Income.
According to Segmented Income Statement, it`s safe for Sugarsmooth to expend it`s
marketing base