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Everett: Prepare a divisional income statement

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Everett makes 3 types lawn mowers. Information regarding them is below.

Deluxe Super Regular

Selling Price $400 $350 $250
Variable Expenses 200 175 170
Contribution Margin 200 175 80
Machine Hours Required 4 5 2

Fixed Costs $2,500,000

Constraints are as follows:
Machine Hours 80,000
Demand
Deluxe 10,000
Super 6,000
Regular 12,000

Prepare a divisional income statement at the optimal profit level. Fixed costs will be allocated using sales.

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Solution Summary

The expert prepares a divisional income statement.

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
Recent Feedback
  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
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