Jimmy is proposing to begin manufacturing smart phone covers which sell for $25 each. Jimmy estimates that monthly sales volume will be 8,500 units. Variable product costs will be $15.50 per unit and fixed overhead will be $5.20 per unit. Half of the fixed overhead is directly traceable to the smart phone cover line. To promote the covers, Jimmy proposes a $1.25 per unit commission to the company’s salespeople and a $7,500 per month advertising campaign. In compliance with corporate policy, the smart phone cover line will also be allocated $15,000 in fixed corporate support costs. Required a. Prepare a traditional monthly income statement for the smart phone cover line. b. Prepare a monthly income statement that highlights the proposed smart phone cover line’s segment margin. c. Which income statement would you recommend that Jimmy use when pitching the proposed line to company managers? Why would you recommend she use this statement?
Jimmy is proposing to begin manufacturing smart phone covers which sell for $25 each. Jimmy estimates that monthly sales volume will be 8,500 units. Variable product costs will be $15.50 per unit and fixed
Required
a. Prepare a traditional monthly income statement for the smart phone cover line.
b. Prepare a monthly income statement that highlights the proposed smart phone cover line’s segment margin.
c. Which income statement would you recommend that Jimmy use when pitching the proposed line to company managers? Why would you recommend she use this statement?
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