Soccer Ball Inc., a manufacturer of youth soccer balls, prepared the income statement for the year ended December 31, 2016 (see Exhibit 1): Exhibit 1 Income Statement Sales (1888,000 units) $9,440,000 Cost of sales 5,664,000 Gross margin $3,776,000 Delivery costs Containers $182,000 Packing and Shipping Labor $438,000 Freight $800,000 $1,420,000 Selling Costs Sales Manager $60,000 Sales Salaries $90,000 Commissions $80,000 Sports Consortium Commissions $70,000 Bad Debts $30,000 $330,000 Advertising Educational Media $120,000 Sport Industry Media $90,000 $210,000 General Business Support $150,000 Operating Profit $1,666,000 The company sells soccer balls to schools, childrens sports teams, and sporting goods stores which represents 4 segments. The selling price per unit is $5. The cost of sales is all variable. Large public and private schools receive advertising through educational media, and place orders directly to the manufacturing plant. No sales Staff calls are made. Orders are received through the mail, fax, telephone or by computer. School districts arrange for their own delivery and send a truck to the plant to pick up orders when they are ready. Smaller private schools located with 100 mile radius of then plant are visited by salesmen. These salesmen are paid commissions, and are not company employees. Sporting goods stores within a 400 miles radius of the plant are visited by 4 salesmen who are company employees and are paid a salary. Childrens sports teams within 600 miles radius of the plant are contacted through a sports consortium which sells to leagues. Advertising is done through sports industry media. The cost of that advertising is shared 50/50 with the sports consortium. The sports consortium receives a commission on their sales. 2 The Sales manager oversees the sales to all segments and his work benefits all segments based on their volume of activity. General business support Soccer balls are sold in containers of three (3) different sizes: namely, 16s (small), 32s (medium), and 48s (large). Each order is comprised of a cases lot of o appropriate containers. The units associated with the packaging each case are depicted in Exhibit 2. Exhibit 2 Small Medium Large Container $2 $3 $4 Packing & shipping labor $6 $7 $8 In addition, delivery freight is charged to Soccer Inc., based on the number of containers shipped and delivery miles. During 2016, an analysis of the marketing operations was made. Exhibit 3 shows the results of that analysis. Exhibit 3 Total Large schools Small Private Schools Sporting Goods Stores Sports Team Sales Number of orders Small Cases 22000 4000 18000 Medium Cases 30000 8000 5000 15000 2000 Large Cases 12000 7000 5000 Provision for uncollectible accounts as % of sales 0.30% 0.15% 0.40% 0.268% Required 1. Prepare a statement showing the profitability of each type of sales, i.e., large schools, small private schools, sporting goods stores, and sports team sales. Prepare supporting schedules to show the allocation of cost items. Describe the basis on which costs were assigned or allocated to each. (hint: freight costs are charged based on the number of containers shipped and miles driven. To allocate freight costs to customers the number of containers times the number of miles radius of the plant is appropriate) 80 points 2. Prepare a partial statement showing the gross profit (sales less cost of goods sold) of each container size of balls sold. 20 points

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