Question No. Two

"XYZ Co." manufactures three products X, Y, and Z. The trading results of the last year are shown below: (in L.E. 1000`s)

Sales Revenue Manufacturing and marketing variable costs Fixed costs: Manufacturing Marketing Administrative	Product (X)	Product (Y)	Product (Z)
	200 70% of sales 15 10 15	80 75% of sales 10 7 5	20 75% of sales 5 6 4

1) Fixed marketing costs would have been avoided if the product was discontinued

2) All fixed manufacturing and administrative expenses are common to the three products.

Required:

1- Prepare a contribution margin based income statement for the last year.

2- Prepare the income statement if any product(s) should be eliminated, assuming that sales of the remaining products would not be affected, any other assumptions made should be included with your explanation . .

3- Assuming that product (Z) is eliminated, this will increase the production and sales of product (X) by 10% without increasing any fixed costs. Prepare the income statement