Q10SE - Horngren'S Financial And Managerial Accounting

Question

 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.                                                      

 

Step-by-Step Solution

Answer

Answer

 

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

 

Step 1: 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

Step 2: 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