A) Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plants operation.

Beginning inventory		0
Units produced		45,000
Units sold		40,000
Selling price per unit		$78
Selling and administrative expenses:
Variable per unit		$2
Fixed (total)	$	557,000
Manufacturing costs
Direct materials cost per unit		$14
Direct labor cost per unit		$8
Variable manufacturing overhead cost per unit		$2
Fixed manufacturing overhead cost (total)	$	810,000

Because the new antenna is unique in design, management is anxious to see how profitable it will be and has asked that an income statement be prepared for the month.

Required:

1.	Assume that the company uses absorption costing.

a.	Determine the unit product cost. (Omit the "$" sign in your response.)

Unit product cost

$

b.	Prepare an income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Absorption Costing Income Statement
(Click to select)Gross marginCost of goods manufacturedSalesNet operating income (loss)Selling and administrative expenses	$
(Click to select)SalesNet operating income (loss)Cost of goods soldSelling and administrative expensesGross margin
(Click to select)Cost of goods soldSalesGross marginNet operating income (loss)Selling and administrative expenses
(Click to select)Selling and administrative expensesCost of goods soldGross marginSalesNet operating income (loss)
(Click to select)Selling and administrative expensesSalesGross marginNet operating income (loss)Cost of goods sold	$

2.	Assume that the company uses variable costing.

a.	Determine the unit product cost. (Omit the "$" sign in your response.)

Unit product cost

$

b.	Prepare a contribution format income statement for the month. (Input all amounts as positive values except losses which should be indicated by a minus sign. Omit the "$" sign in your response.)

Variable Costing Income Statement

(Click to select)Fixed manufacturing overheadSalesContribution marginNet operating income (loss)Variable selling and administrative expensesVariable cost of goods soldFixed selling and administrative expenses

$

Variable expenses:

(Click to select)Variable selling and administrative expensesContribution marginVariable cost of goods soldNet operating income (loss)Fixed manufacturing overheadSalesFixed selling and administrative expenses

$

(Click to select)Contribution marginVariable selling and administrative expensesSalesFixed selling and administrative expensesVariable cost of goods soldFixed manufacturing overheadNet operating income (loss)

(Click to select)Variable selling and administrative expensesSalesVariable cost of goods soldNet operating income (loss)Fixed selling and administrative expensesContribution marginFixed manufacturing overhead

Fixed expenses:

(Click to select)Fixed manufacturing overheadContribution marginVariable cost of goods soldVariable selling and administrative expensesNet operating income (loss)SalesFixed selling and administrative expenses

(Click to select)SalesNet operating income (loss)Variable cost of goods soldVariable selling and administrative expensesFixed manufacturing overheadFixed selling and administrative expensesContribution margin

(Click to select)Fixed selling and administrative expensesFixed manufacturing overheadVariable cost of goods soldNet operating income (loss)SalesContribution marginVariable selling and administrative expenses

B) Vega Foods, Inc., has recently purchased a small mill that it intends to operate as one of its subsidiaries. The newly acquired mill has three products that it offers for salewheat cereal, pancake mix, and flour. Each product sells for $10 per package. Materials, labor, and other variable production costs are $4.10 per bag of wheat cereal, $5.30 per bag of pancake mix, and $2.90 per bag of flour. Sales commissions are 10% of sales for any product. All other costs are fixed.

The mills income statement for the most recent month is given below:

				Product Line
	Total Company			Wheat Cereal			Pancake Mix			Flour
Sales	$	930,000		$	310,000		$	410,000		$	210,000
Expenses:
Materials, labor, and other		405,300			127,100			217,300			60,900
Sales commissions		93,000			31,000			41,000			21,000
Advertising		140,720			53,200			60,000			27,520
Salaries		114,400			60,300			20,600			33,500
Equipment depreciation		46,500			15,500			20,500			10,500
Warehouse rent		18,600			6,200			8,200			4,200
General administration		78,000			26,000			26,000			26,000
Total expenses		896,520			319,300			393,600			183,620
Net operating income (loss)	$	33,480		$	(9,300)		$	16,400		$	26,380

The following additional information is available about the company:

a.	The same equipment is used to mill and package all three products. In the above income statement, equipment depreciation has been allocated on the basis of sales dollars. An analysis of equipment usage indicates that it is used 40% of the time to make wheat cereal, 50% of the time to make pancake mix, and 10% of the time to make flour.
b.	All three products are stored in the same warehouse. In the above income statement, the warehouse rent has been allocated on the basis of sales dollars. The warehouse contains 37,200 square feet of space, of which 8,000 square feet are used for wheat cereal, 14,000 square feet are used for pancake mix, and 15,200 square feet are used for flour. The warehouse space costs the company $.50 per square foot per month to rent.
c.	The general administration costs relate to the administration of the company as a whole. In the above income statement, these costs have been divided equally among the three product lines.
d.	All other costs are traceable to the product lines.

Vega Foods management is anxious to improve the mills 3.60% margin on sales.

Required:

1.

Prepare a new contribution format segmented income statement for the month. Adjust the allocation of equipment depreciation and warehouse rent as indicated by the additional information provided.(Input all amounts as positive values except losses which should be indicated by a minus sign. Round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

	Total Company	Wheat Cereal	Pancake Mix	Flour
(Click to select)SalariesMaterials, labor & otherGeneral administrationAdvertisingNet operating income (loss)Contribution marginSales commissionsSales	$	$	$	$
Variable expenses:
(Click to select)AdvertisingMaterials, labor, and otherNet operating income (loss)Equipment depreciationContribution marginGeneral administrationSalesSalaries
(Click to select)Contribution marginSales commissionsSalariesEquipment depreciationGeneral administrationNet operating income (loss)AdvertisingSales
Total variable expenses
(Click to select)Net operating income (loss)SalesSalariesWarehouse rentEquipment depreciationContribution marginSales commissionsAdvertising
Traceable fixed expenses:
(Click to select)General administrationContribution marginSalesMaterials, labor & otherAdvertisingNet operating income (loss)Sales commissionsProduct line segment margin
(Click to select)Sales commissionsNet operating income (loss)SalariesSalesProduct line segment marginContribution marginGeneral administrationMaterials, labor & other
(Click to select)Sales commissionsEquipment depreciationGeneral administrationMaterials, labor & otherProduct line segment marginContribution marginSalesNet operating income (loss)
(Click to select)SalesWarehouse rentSales commissionsProduct line segment marginContribution marginMaterials, labor & otherNet operating income (loss)General administration
Total traceable fixed expenses
(Click to select)Contribution marginSalariesMaterials, labor & other, Sales commissionsNet operating income (loss)Sales commissionsProduct line segment marginAdvertisingSales	$	$	$	$
Common fixed expenses:
(Click to select)SalariesContribution marginEquipment depreciationSales commissionsSalesAdvertisingGeneral administrationMaterials, labor & other
(Click to select)Contribution marginGeneral administrationAdvertisingSales commissionsSalariesMaterials, labor & otherSalesNet operating income (loss)	$

2.	After seeing the income statement in the main body of the problem, management has decided to eliminate the wheat cereal because it is not returning a profit, and to focus all available resources on promoting the pancake mix.

a.

Based on the statement you have prepared, do you agree with the decision to eliminate the wheat cereal?

	No
	Yes

$