1. Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two, peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewer jars per case. Data concerning the two products follow:

   	Peanut Butter	Cashew Butter	Unused Capacitya	units of Purchaseb
   Expected sales (in cases)	50,000	10,000	-	-
   Selling price per case	$100	$80	-	-
   Direct labor hours	40,000	10,000	-	As needed
   Receiving orders	500	250	250	500
   Packing orders	1,000	500	500	250
   Material cost per case	$50	$48	-	-
   Direct labor cost per case	$10	$8	-	-
   Advertising costs	$200,000	$70,000	-	-
   aPractical capacity less expected usage (all unused capacity is permanent).
   bIn some cases, activity capacity must be purchased in steps (whole units). These steps are provided as necessary. The cost per step is the fixed activity rate multiplied by the step units. The fixed activity rate is the expected fixed activity costs divided by practical activity capacity.

   Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity driver.

   Activity	Fixeda	Variableb
   Direct labor benefits	$0	$200,000
   Machine	200,000	250,000
   Receiving	200,000	22,500
   Packing	100,000	45,000
   Total costs	$500,000	$517,500

   ^aCosts associated with practical activity capacity. The machine fixed costs are all depreciation with direct labor hours as the driver.

   ^bThese costs are for the actual levels of the cost driver.

   Required:

   1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours.

   Nutterco, Inc.
   Traditional Income Statement
   	Peanut Butter	Cashew Butter	Total
   Revenues	$	$	$
   Less variable expenses:
   Direct materials
   Direct labor
   Variable overhead
   Contribution margin	$	$	$
   Less direct fixed expenses
   Product margin	$	$	$
   Less common fixed expenses
   Operating income			$

   2. Prepare an activity-based segmented income statement. Use a minus sign to indicate a negative product margin.

   Nutterco, Inc.
   Activity-Based Income Statement
   	Peanut Butter	Cashew Butter	Total
   Revenues	$	$	$
   Less variable costs
   Contribution margin	$	$	$
   Less traceable expenses:
   Advertising
   Receiving
   Packing
   Product margin	$	$	$
   Less unused activity expenses:
   Receiving
   Packing
   Common fixed expenses (machine depreciation)
   Operating income			$