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    Prepare a Segmented Income Statement

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    Prepare a segmented income statement (showing the income for each product and the total) for the company. Use ABC to allocate all fixed costs to the two products.

    Background information
    Total Prod A Prod B
    Beginning inventory 0
    Units produced 10,000 2,500 7,500
    Units sold 8,000 2,000 6,000

    Selling price per unit $300 540 220
    Variable costs per unit
    Direct material 120 270 70
    Direct labor 90 60 60
    Variable overhead 40 85 25
    Variable selling and admin. exp. 10 13 9

    Fixed costs
    Fixed manufacturing overhead 250,000
    Fixed selling and administrative 100,000

    Production runs (not $) 100 75 25
    Number of sales reps (not $) 30 20 10

    Here are the first few lines of the segmented income statement to help you get started. Complete the statement in good format and make sure you allocate the fixed costs to the two products. Need comments on the information and the relative profitability of the two products.

    Herrestad Company
    Segmented Income Statement
    For the period ending Dec. 31, 2011
    A B Total
    Sales $1,080,000 $1,320,000 $2,400,000
    Variable costs:
    Direct material 540,000 420,000 960,000.

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    https://brainmass.com/business/income-statement/segmented-income-statement-412883

    Solution Preview

    ANSWER
    SEGMENT INCOME STATEMENT
    A B Total
    sales-a 1080000 1320000 2400000
    less:
    variable costs
    direct materials 540000 420000 960000
    direct labor 120000 360000 480000
    variable overhead 170000 150000 320000
    variable selling and admn expenses 26000 54000 80000
    totalvariablecosts ...

    Solution Summary

    The income is prepared in an attached Excel sheet where you can highlight the cells to view the formulae.

    $2.19

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