Chocolatiers Company produces two products: Solid chocolate and powdered chocolate. Cost and

revenue data for each product line for the current month are as follows:

Solid Powdered

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $850,000 $870,000

Contribution margin as a percentage of sales . . . . . . . . . . . . . . . . . . 45% 55%

Fixed costs traceable to product lines . . . . . . . . . . . . . . . . . . . . . . . . $175,000 $250,000

In addition, fixed costs that are common to both product lines amount to $125,000.

Instructions

1. PrepareChocolatier'sresponsibilityincomestatementforthecurrentmonth.Reporttheresponsibilitymarginforeachproductlineandincomefromoperationsforthecompanyasawhole.Alsoincludecolumnsshowingalldollaramountsaspercentagesofsales.
3. Accordingtotheanalysisperformedinparta,whichproductlineismoreprofitable?Shouldthecommonfixedcostsbeconsideredwhendeterminingtheprofitabilityofindividualproductlines?Whyorwhynot?
5. Chocolatiers has $15,000 to be used in advertising for one of the two product lines and expects that this expenditure will result in additional sales of $50,000. How should the company decide which product line to advertise?

The example below is just an example of what it should look like.. you can use the same sheet just remove the current information.

Problem 22.1 A Format Sales Variable Costs Contribution Margin Fixed Cost Traceable to Product Lines Product Responsibility Margin Common Fixed Costs Income from Operations Entire Company Dollars Percent 875,000 100% 395,000 45% 480,000 55% 255,000 29% 225,000 26% 125,000 14% 100,000 11% Product A Dollars Percent 450,000 100% 195,000 43% 255,000 57% 135,000 30% 120,000 27% Product B Dollars Percent 425,000 100% 200,000 47% 225,000 53% 120,000 28% 105,000 25%