Pralina Products Company is a regional firm that has three major product lines cereals, breakfast bars,

and dog food.

The income statement for the year ended April 30, Year 4, is shown below; the statement

was prepared by product line using full-absorption costing.

PRALINA PRODUCTS COMPANY

Income Statement

For the Year Ended April 30, Year 4

(In thousands)

Cereals

Breakfast

Dog

Bars

Food

Total

Sales in pounds

...............................................

2,000

500

500

3,000

Revenue from sales

.........................................

$1,000

$ 400

$ 200

$1,600

Cost of sales:

Direct materials

...........................................

329

158

100

587

Direct labor

..................................................

90

40

20

150

Factory overhead

.........................................

108

48

24

180

Total cost of sales

....................................

527

246

144

917

Gross margin

...................................................

473

154

56

683

Operating costs:

Selling costs:

Advertising

................................................

40

20

10

70

Commissions

.............................................

50

40

20

110

Salaries and related benefits

......................

30

20

10

60

Total selling expenses

..............................

120

80

40

240

General and administrative costs:

G&A salaries and related benefits

...........

49

25

15

89

Total operating costs

..........................

169

105

55

329