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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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