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Chapter 21: Q10SE (page 1168)

Analyzing profitability

Camden Company has divided its business into segments based on sales territories: East Coast, Midland, and West Coast. Following are financial data for 2018:

East Coast

Midland

West Coast

Units sold

71

69

53

Sales price per unit

\(10,300

\)13,600

\(12,000

Variable cost per unit

6,283

7,072

7,080

Prepare an income statement for Camden Company for 2018 using the contribution margin format assuming total fixed costs for the company were \)435,000. Include columns for each business segment and a column for the total company.

Short Answer

Expert verified

Answer

The total operating income of the company is $561,399.

Step by step solution

01

Calculation of net sales revenue and variable cost

Particulars

East Coast

Midland

West Coast

Net sales revenue (Units sold x Sales price per unit)

71x$10,300 =$731,300

69x$13,600 =$938,400

53x$12,000 =$636,000

Variable cost (Units sold x Variable cost per unit)

71x$6,283 =$446,093

69x$7,072 =$487,968

53x$7,080

=$375,240

02

Income statement for Camden Company for 2018

Particulars

East Coast

Midland

West Coast

Total company

Net sales revenue

$731,300

$938,400

$636,000

$2,305,700

Less: Variable cost

$446,093

$487,968

$375,240

$1,309,301

Contribution Margin

$285,207

$450,432

$260,760

$996,399

Less: Total fixed cost

$435,000

Operating Income

$561,399

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Most popular questions from this chapter

Computing absorption costing gross profit

Refer to your answers to Short Exercise S21-6. Product X sells for \(175 per unit. Assume no beginning inventories. Calculate the gross profit using absorption costing when Adamson:

  1. Produces and sells 2,000 units.
  2. Produces 2,500 units and sells 2,000 units.
  3. Produces 5,000 units and sells 2,000 units.

S21-6 Direct materials \) 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per ye

Using Excel for variable costing

Download an Excel template for this problem online in MyAccountingLab or athttp://www.pearsonhighered.com/Horngren. Tiger Mountain Gelato incurs thefollowing costs for its premium ice cream in May 2018:

Direct materials cost per pint $ 2.50 perpint

Direct labor cost per pint 0.75 per pint

Variable manufacturing overhead cost per pint 0.25 per pint

Fixed manufacturing overhead costs 6,000 per month

Total fixed selling and administrative costs 5,000 per month

Sales price per pint 8.00 per pint

Pints of gelato produced 12,000 pints

Pints of gelato sold 11,500 pints

There were no beginning inventories, so Tiger Mountain Gelato has 500 pintsin ending Finished Goods Inventory (12,000 pints produced less 11,500 pintssold).

Requirements

1. Calculate Tiger Mountain Gelato’s product cost per pint under absorptioncosting and variable costing.

2. Calculate the balance in Finished Goods Inventory on May 31, 2018, usingabsorption costing and variable costing.

3. Prepare income statements in good form for Tiger Mountain Gelato for May2018 using absorption costing and variable costing.

4. Reconcile the differences between operating incomes and Finished GoodsInventory balances between the two-costing method

Comparing variable and absorption costing Refer to Exercises E21-16 and E21-17.

Requirements:

  1. Which costing method produces the highest operating income? Explain why.
  2. Which costing method produces the highest April 30 balance in Finished Goods Inventory? Explain why

In the long run, all costs are controllable. Is this statement true? Why or why not?

Using variable costing, service company Henry’s Helpers provides locksmith services. One type of service call is to evaluate private residences for security concerns and make recommendations for a safety plan. Use the data below to determine the company’s total contribution margin, contribution margin per service call, and contribution margin ratio when 220 service calls are made in the month of June.

Service Revenue $ 170 per service call

Variable Costs 68 per service call

Fixed Costs 21,040 per month
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