Hello I need help with the two questions:

1. 1) Based on Exhibits 1 and 2, prepare a contribution format of income statement. For sales and variable costs, show both total $ amount and per unit $ amount by product line. For fixed expenses, no need to split them into product lines. What is the companys break-even point in dollar sales?

2. 2) Do you agree with Waters decision to keep product 103? Why? Note that you may use your contributionformat of income statement from exercise 1) to show your analysis.

Exhibit 4 Pr and Loss by Products and Departments at Standard and Total Company Variances from January 1 to June 30, 2005 (thousands except per 100 lbs.) Product 101 Product 102 Product 103 Variances Favorable Unfavorable Standard Standard r 100 lbs Standard Total at Standard Total at Standard Total Standard Total Actual Item r 100 lbs. r 100 lbs. Standard S 952 $ 877 S 1,090 S 2,919 839 793 $2,660 +259 Property Insurance Compensation Insurance Direct Labor Indirect Labor 249 +61 6,041 2,063 109 5.92 3.496 13,751 13,820 4.485 4,698 Light & Heat Building Service 08 147 9,301 747 3,261 3,579 4,91 2,461 25 180 $14.09 $14,034 4,257 1,615 2,642 $ 16.44 S 9,248 2,386 902 1,855 $34,406 9,830 3,289 6,817 730 $55,072 Total S 11,708 3,162 897 2,962 $34,990 9,805 Selling Expense General Administrative 4.27 1.26 1.80 2.65 3.70 7.459 793 $56,461 Total Cost $22.88 $22,797 $26.69 S19,007 $29.24 $14,657 +1,389 Less: Other Income $ 26.64 25.23 $ 18,971 17,961 $22.84 24.24 S 1.40 996,859 $22,757 $29.19 $14,632 $56,360 55,675 685 $54,962 +1,398 Actual Sales (net)a Profit Unit Sales (100 Ibs.) 27.03 13.550 55,675 S1,407 +1,398 712,102 501,276 Source: Casewriter Actual unit sales times standard net revenue per unit. Exhibit 2 Analysis of Profit and Loss by Products and Departments Year Ended December 31, 2004 (thousands except per 100 lbs.) Classification Product 102 t 103 Allocation Basis r 100 lbs $.88 $ 5,324 Cubic space Taxes Property Insurance Compensation Insurance Direct Labor Value of equipment Direct labor (S) Direct labor (S) 2,309 Machine horsepower Building Service Selling Expense S value of sales $ value of sales Value of equipment Value of equipment General Administrative 1,783 $ value of sales Unit Sales (100 bs.) Quoted Selling Price Per Unit Cash Discount Taken (% of 2,132,191 1,029,654 1.48% 1.08% Source: Casewriter Note: Figures may not add exactly because of rounding. Exhibit1 Profit and Loss Statement for Year Ending December 31, 2004 (000) Gross Sales $105,905 1,567 $104,338 65,251 $39,087 Cash Discount Cost of Manufacturing Less: Selling Expense Net Sales Manufacturing Profit $18,383 6.534 13,591 General Administration Depreciation 38,508 Operating Profit $579 205 784 1472 $ 688 Other Income Net Profit before Interest Less: Interest Net Loss Source: Casewriter cost. Total cost was the sum of the product factory's direct costs plus allocated indirect costs less an allocated other-income amount. Allocated indirect costs included the company's interest cost related to bank loans. Costs designated as direct costs were assigned directly to the product factory in which they were incurred. For example, the cost of materials used to manufacture product 10 in 101 Factory was charged directly to the 101 Factory account. This material cost could be traced directly to 101 Factory through material purchase and requisition orders. Indirect costs were allocated to the product factories using a variety of allocation methods (see Exhibit 2). For example, the total company rent expense ($5,324,000) was allocated to each product factory based on its enclosed cubic space. Cubic space was selected as the allocation basis to capture the fact that the production process for each of the three products included enclosed scrubber towers that varied in height depending on the product produced. Using the cubic space as the allocation base, the total company rent was charged as shown in Figure A to each product factory Figure A Total Company Rent ($5,324,000) Actual Rent Expense Allocation Basis (cubic space) 101 Factory ($1,872,000) 102 Factory ($1,570,000) 103 Factory ($1,882,000) Allocated Rent Source: Casewriter The allocated per 100-pound rent cost of each product was derived by dividing the unit output of each product factory into the respective product factory's allocated rent. A standard cost system was introduced in early 2005. It was used to value inventories, prepare budgets, and analyze performance (see Exhibit 4). Next year's standard costs were last year's actual per unit costs adjusted for anticipated cost changes. Since Superior's three products were each sold in 100-pound bags, per unit standards were expressed in terms of 100 pounds of finished product. Drop 103? To familiarize Paul Harvey with his methods, Waters sent copies of Exhibits 2 and 3 to Harvey and they discussed them. Harvey stated that he thought product 103 should be dropped immediately as it would be impossible to lower expenses on product 103 as much as $2.16 per 100 pounds. In addition, he stressed the need for economies on product 102