Omstadt Corporation produces and sells only two products that are referred to as RIPS and PITS. Production is "for order" only, and no finished goods inventories are maintained; work in process inventories are negligible. The following data relate to last month's operations:
$36,000 of the manufacturing overhead assigned to RIPS and $72,000 of that assigned to PITS is fixed. The balance of the overhead is variable. Selling expenses consist entirely of commissions paid as a percentage of sales. Direct labor is completely variable. Administrative expenses are fixed and cannot be traced to the products but have been arbitrarily allocated to the products.
Required:
Prepare a segmented income statement, in total and for the two products. Use the contribution approach.

Question

Omstadt Corporation produces and sells only two products that are referred to as RIPS and PITS. Production is "for order" only, and no finished goods inventories are maintained; work in process inventories are negligible. The following data relate to last month's operations:

$36,000 of the manufacturing overhead assigned to RIPS and $72,000 of that assigned to PITS is fixed. The balance of the overhead is variable. Selling expenses consist entirely of commissions paid as a percentage of sales. Direct labor is completely variable. Administrative expenses are fixed and cannot be traced to the products but have been arbitrarily allocated to the products.
Required:
Prepare a segmented income statement, in total and for the two products. Use the contribution approach.

Nitya Vangala · Accepted Answer

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