Company Y produces and sells two packaged products Weedban and Greengrow Revenue and cost information related to the products follows: Weedban Greengrow SALES price per unit $9.00 $ 31.00 Variable expense per unit $2.90 $14.00 Traceable fixed expense per year $131,000 $44,000 Last year the company produced and sold 38,500 units of weed ban and 17,000 of Green grow. It's annual common fixed expenses are $106,000. Prepare a contribution format income statement segmented by-product lines ?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Company Y produces and sells two packaged products
Weedban and Greengrow
Revenue and cost information related to the products follows:
Weedban Greengrow
SALES price per unit $9.00 $ 31.00
Variable expense per unit $2.90 $14.00
Traceable fixed expense per year $131,000 $44,000
Last year the company produced and sold 38,500 units of weed ban and 17,000 of Green grow. It's annual common fixed expenses are $106,000.
Prepare a contribution format income statement segmented by-product lines ?
Thank you,
Please find below the contribution format income statement segmented by-product lines -
Sales for Weedban = 38500 * $9 = $346,500
Sales for Greengrow = 17000 *31 = $527,000
Variable expenses for Weedban = 38500 * $2.9 = $111,650
Variable expenses for Greengrow = 17000 * $14 = $238,000
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