Valdespin Company manufactures three stres of camping tents--small (S), medium (M), and large (L). The income statement has consistently indicated a not 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. I Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by S46,080 and $32.240, respectively. It Proposal 3 is selected, it is anticipated that an additional annual expenditure of $34,580 for the rent of additional warehouse space would yield an additions 130% n Size S sales volume ne. 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, 2099, is as follows: 1 Size S Size M Size L Total 2 Sales $668,000.00 $737,300.00 $956,160.00 $2,361,460.00 3 Cost of goods sold: Variable costs 4 $300,000.00 $357,120.00 $437,760.00 $1,094,880.00 5 Fixed costs 74,880.00 138,250.00 385,950.00 6 172,800.00 $610.560.00 $374,880.00 $1,480,810.00 Total cost of goods sold Gross profit Operating expenses Variable expenses $495,370.00 $241,950.00 $293,120.00 $345,600.00 $880,650.00 $132480,00 $155,500.00 $195,840.00 $483,820.00 10 Fixed expenses 92,160.00 105,680.00 115,200.00 311,040.00 11 Total operating expenses $224,640.00 $259,180.00 $311,040,00 $794,860.00 12 Income from operations 568,480.00 $(17,250.00) $34,560.00 $85,790.00 Required: 1. Prepare an income statement for the past year in the variable costing format. Data for each style 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 income from operations. 2. Based on the income statement prepared in (1) and the other data presented, determine the amount by which total annual Income from operations would be reduced below its present level if Proposal 2 is accepted. I a loss is ncurred, enter that amount as a negative number using a minus sign 3. Prepare an income statement in the variable costing format, Indicating the projected annual income from operations of Proposal 3 is accopted. Data for each style should be reported through contribution margin. The fixed costs should be deducted from the total contribution margin as reported in the "Total column. For purposes of the problem, the expenditure of $34,560 for the rental of additional warehouse space can be added to the fixed operating expenses." 4. By how much would total annual income increase above its present level # Proposal 3 is accepted? *Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () will automatically appear if it is required. Enter all amounts as positive numbers Labels For the Year Ended June 30, 2049 Fixed costs June 30, 20Y9 Amount Descriptions Contribution margin Cost of goods sold Manufacturing costs Operating expenses Gross profit Income from operations Manufacturing margin Sales Total fixed costs Variable cost of goods sold Variable operating expenses Valdospin Company Variable Costing Income Statement (Label) Sizes 1 Size M Size L Total 2 3 Label . 10 11 2. Based on the income statement prepared in (1) and the other data presented, determine the amount by which total annual income from operations would be level if Proposal 2 is accepted. If a loss is incurred, enter that amount as a negative number using a minus sign 3. Prepare an income statement in the variable costing format, indicating the projected annual income from operations if Proposal 3 is accepted. Data for each style should through contbuton margin. The fixed costs should be deducted from the total contribution margin as reported in the Total column. For purposes of this problem, the expen $34,560 for the rental of additional warehouse space can be added to the fixed operating expenses. Refer to the lists of Labels and Amount Descriptions for the exact word answer choles for text entries. Be sure to complete the statement heading. A colon () will automatically appear if it is required. Enter all amounts as positive numbers. Valdespin Company Variable Costing Income Statement (Label) 1 Size 5 Size 1 Total 2 1 4 5 6 Label 10 21 4. By how much would total annual income increase above its present level if Proposal 3 is accepted