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Unformatted text preview: ......................................................................... Less: Cost of goods sold (23,000 × $17.10) ...................... Gross margin ....................................................................... Less: Selling and administrative expenses ...................... Operating income ........................................................... $ 598,000 393,300 $ 204,700 118,800 $ 85,900 10–4 1. Cocino Company Product-Line Income Statements Blenders Sales $ 2,200,000 Less: Variable cost of goods sold 2,000,000 Contribution margin $ 200,000 Less: Direct fixed expenses 90,000 Product margin $ 110,000 Less: Common fixed expenses Net income 324 Coffee Makers $ 1,125,000 1,075,000 $ 50,000 45,000 $ 5,000 Total $ 3,325,000 3,075,000 $ 250,000 135,000 $ 115,000 115,000 $ 0 2. If the coffee-maker line is dropped, profits will decrease by $5,000, the product margin. If the blender line is dropped, profits will decrease by $110,000. 3. Blenders Sales $ 2,405,000 Less: Variable cost of goods sold 2,200,000 Contribution margin $ 205,000 Less: Direct fixed expenses 90,000 Product margin $ 115,000 Less: Common fixed expenses Operating income Coffee Makers $ 1,125,000 1,075,000 $ 50,000 45,000 $ 5,000 Profits increase by $5,000. Alternatively, Increased profit = ($20.50 - $20.00) × 10,000 = $5,000 10–5 1. Absorption costing: Direct materials Direct labor Variable overhead Fixed overhead Unit cost $1.20 0.75 0.65 3.10 $5.70 Cost of ending inventory = $5.70 × 200 = $1,140 2. Variable costing: Direct materials Direct labor Variable overhead Unit cost $1.20 0.75 0.65 $2.60 Cost of ending inventory = $2.60 × 200 = $520 3. Selling price Less: Variable cost of goods sold Commission Contribution margin per unit $ 7.50 (2.60) (0.75) $ 4.15 325 Total $ 3,530,000 3,275,000 $ 255,000 135,000 $ 120,000 115,000 $ 5,000 4. Sales ($7.50 × 17,600) ............................... Less: Variable cost of goods sold ................ Commissions ..............................
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This document was uploaded on 11/26/2013.

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