PR 21-5A Segment Variable Costing Income Statement and Effect on Operating Income of Change in Operations Obi: 4 Valdespin Company manufactures the stres of camping tents-small ()medium (M) and large (L.). The income statement has consistently indicated a niet loss for the M size, and management is considering three proposals: (1) continue Size M. (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fiord production costs fixed operating expenses could be reduced by 346,080 and 532,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of 534,560 for the rental of additional warehouse space would yield an additional 1309 in Sizes sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M The sales and costs have been relatively stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended June 30, 2019, is as follows: 5 Si M 5737,100 L Total $ 2.351.460 5 66000 5956. 160 Sales Cost of goods sold Vartable costs Pued costs Total cost of goods sold Gross profit Operating expenses Variable expenses Fored expenses Total operating expenses Operating income fosse $300,000) 5057,120) 74,880 138.250 $0748803(495370 $ 293,120 5 241.930 50437,7601 122.00) 51610.560) 5345.600 $11.00 085,930 5040 510 $3650 5(132.480) 30155,500) 192.160 (103.680 51224640559.180 $ 64,480 5 07250) 5 (195,640) (115.2009 5011040) 5 34.560 5483.820 B110 $2004 585.90 Instructions 1. Prepare an income statement for the past year in the variable costing format. Use the following headings: Instructions 1. Prepare an income statement for the past year in the variable costing format. Use the following headings Size S M L Total Data for each size should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin, as reported in the "Total column to determine operating income An Check Figure: Contribution margin, Size S, $235,520 2. Based on the income statement prepared in (a) and the other data presented, determine the amount by which total antal operating Income would be reduced below its present level of Proposal 2 is accepted 3. Prepare an income statement in the variable costing format. Indicating the projected annual operating incomo lf Proposal 3 is accepted. Use the following headings Size Total Data for each style should be mported through contribution margin. The fixed costs should be deducted from the total contribution marginas reported in the Total column Por purposes of this problem, the expenditure of 534,560 for the rental or additional warehouse space can be added to the fled operating expenses. by how much would total anual operating income increase above its present well Proposals accepted? Explain MacBook Pro 0, to is % 5 fx B D E F 6 H 1 M 1. Valdespin Company Variable Costing Income Statement For the Year Ended June 30, 2049 Size S M Total Sales Variable cost of goods sold Manufacturing margin Variable operating expenses Contribution margin Fored costs Manufacturing costs Operating expenses Total foced costs Operating Income 2. If Proposal 2 is accepted: Contribution margin for Size M Loss Reduction in foxed production costs Reduction in foed operating expenses Reduction in annual operating income 3. Valdespin Company Variable Costing Income Statement For the Year Ended June 30, 2019 Size L Total Sales Variable cost of goods sold Manufacturing margin Variable operating expenses Contribution margin Fand costs Manufacturing costs Operating expenses including additional rent) Total fed costs Operating income of Proposal 3 is accepted: APE 217)-5A Ready MacB = = = D E F G H 1 J K L I Proposal 3 is accepted: Operating income, Proposal 3 Operating incomo, present conditions (part 1) Increase in operating income P Pr. 2117.50