Question
Soccer Ball Inc., a wholesaler of youth soccer balls, prepared the income statement for the year ended December 31, 2015 (see Exhibit 1): Exhibit 1
Soccer Ball Inc., a wholesaler of youth soccer balls, prepared the income statement for the year ended December 31, 2015 (see Exhibit 1):
Exhibit 1 | ||
Income Statement | ||
Sales ( 1,760,000 units) | $10,560,000 | |
Cost of sales | $6,336,000 | |
Gross margin | $4,224,000 | |
Delivery costs | ||
Containers | $170,000 | |
Packing and Shipping Labor | $410,000 | |
Freight | $800,000 | $1,380,000 |
Selling Costs | ||
Sales Manager | $50,000 | |
Sales Salaries | $90,000 | |
Commissions | $80,000 | |
Sports Consortium Commissions | $70,000 | |
Bad Debts | $37,248 | $327,248 |
Advertising | ||
Educational Media | $100,000 | |
Sport Industry Media | $85,000 | |
$185,000 | ||
General Business Support | $140,000 | |
Operating Profit | $2,191,752 |
The company sells soccer balls to schools, childrens sports teams, and sporting goods stores which represents 4 segments. The selling price per unit is $ 6. Costs of sales are variable costs.
Large public and private schools receive advertising through educational media, and place orders directly to Soccer ball Inc. 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 wholesaler to pick up orders when they are ready.
Smaller private schools located with 100 mile radius of the wholesaler are visited by salesmen. These salesmen are paid commissions, and are not company employees.
Sporting goods stores within a 400 miles radius of the wholesaler are visited by 4 salesmen who are company employees and are paid a salary.
Childrens sports teams within 600 miles radius of the wholesaler are contacted through a sports consortium which sells to leagues. Advertising is done through sports industry media. The cost of that
1
advertising is shared 50/50 with the sports consortium. The sports consortium receives a commission on their sales.
The Sales manager oversees the sales to all segments.
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 2015, 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 | 20000 | 4000 | 16000 | ||
Medium Cases | 30000 | 8000 | 5000 | 15000 | 2000 |
Large Cases | 10000 | 7000 | 3000 | ||
Provision for Uncollectible accounts % of sales | 0.30% | 0.20% | 0.40% | 0.50% |
Required
Prepare a statement showing the gross profit (sales less cost of goods sold) of each container size of balls sold.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started