Question

Hepras, Inc., has two product lines: routers and ethernet switches. During the current month, the two product lines reported the following results. Routers Switches Sales $ 590,000 $ 990,000 Variable costs (as a percentage of sales) 40 % 45 % Traceable fixed costs $ 250,000 $ 125,000 In addition, fixed costs common to both product lines amounted to $213,000. Prepare an income statement showing percentages as well as dollar amounts. Conclude your statement with income from operations for the business and with the responsibility margin for each product line. (Round percentage answers to 2 decimal place. i.e. 0.1234 should be considered as 12.34%.)

Answer 1

Hepras, Inc

Routers Switches Total

Sales $ 590,000 100% $ 990,000 100% $ 1,580,000 100%

Variable costs

(as a percentage

of sales) 236,000 40% 445,500 45 % 681,500 43.13%

Contribution $354,000 60% 544,500 55% 898,500 56.87%

Traceable

fixed costs 250,000 42.37% 125,000 12.62% 375,000 23.73%

Segment Income $ 104,000 17.63% 419,500 42.37% 523,500 33.13%

Common Fixed costs 213,000 13.48%

Net operating income $310,500 19.65%

Step-by-step explanation:

a) Data and Calculations:

Routers Switches

Sales $ 590,000 $ 990,000

Variable costs

(as a percentage

of sales) 40% 45 %

Variable costs = $236,000 ($590,000*40%) $445,500 ($990,000*45%)

Traceable

fixed costs 250,000 125,000

Common Fixed costs = $213,000