Project #51809 - ALLOCATING FIXED COSTS SLP

ALLOCATING FIXED COSTS

Herrestad Company does produce and sell two products and the details below will be used to prepare a segmented income statement (showing the income for each product and the total) for the company. Use ABC to allocate all fixed costs to the two products.

       

Background information

     
 

Total

Prod A

Prod B

Beginning inventory

0

   

Units produced

10,000

2,500

7,500

Units sold

8,000

2,000

6,000

       

Selling price per unit

$255

480

180

Variable costs per unit

     

Direct material

100

280

40

Direct labor

60

60

60

Variable overhead

25

40

20

Variable selling and admin. exp.

10

13

9

       

Fixed costs

     

Fixed manufacturing overhead

200,000

   

Fixed selling and administrative

100,000

   
       
       

Production runs (not $)

100

65

35

Number of sales reps (not $)

25

15

10

Here are the first few lines of the segmented income statement to help you get started. Complete the statement in good format and make sure you allocate the fixed costs to the two products. When done, comment on the information and the relative profitability of the two products.

Herrestad Company

Segmented Income Statement

For the period ending Dec. 31, 2011

 

A

B

Total

Sales

$960,000


$1,080,000

$2,040,000

Variable costs:

     

Direct material

560,000

240,000

800,000

       

SLP Assignment Expectations

The submission should be 2 to 4 pages and need to include answers to all the questions listed above. Show computations, discuss the results and include references in APA format.

Subject Business
Due By (Pacific Time) 12/20/2014 12:00 am
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