Contribution Margin Income Statement

Classification of Relevant Information from Case Provided

Scheduling of year

40 Weeks Product Manufacturing

10 Weeks Visiting Galleries

2 Weeks Holiday

Volume and Selling price of predetermined mix

Vases 6 x 60 360

weights 4 x 40 160

Tumblers 16 x 10 160 Production of bundles in 2000 : 5 bundles per week

Separation of fixed costs from High Low Method is adopted

Bundles Costs 2 ,300 2 ,800 3 ,300

Variable cost per bundle

Costs at 5 Bundles 2 ,800

Costs at 4 Bundles 2 ,300 p

Variable cost 500 Variable cost at 5 Bundles 5 x 500 2 ,500

Fixed Costs 300

Other Costs

Shipping Costs of 80 per bundle variable cost

Sam 's wage (2 hours x 10 20 per bundle (variable cost

Sam 's remaining wage

During Production (10 hours x 10 x 40 weeks 4 ,000

During Visiting (20 hours x 10 x 10 weeks 2 ,000 I presume that Sam will not work the 2 weeks in which Harry is on holiday . The shop will be considered closed in this time frame

Visiting galleries costs 6 ,050 per annum fixed cost

We will apply the information gathered and provided in this section in to answer the questions provided in this coursework

Question 1

Income Statement for year ended 31st December 2000 Traditional Format

Sales (5 x 680 x 40 ) 136 ,000

Production Costs 2 ,800 x 40 ) 112 ,000

Gross Profit 24 ,000

Non-Manufacturing Costs (see note 1 ) 32 ,050

Net (Loss (8 ,050 Source : Drury Colin 1996 ,

202

Note 1

Sam 's Wage (20 hrs x 10 x 50 weeks 10 ,000

Shipping Costs 80 x 5 bundles x 40 weeks 16 ,000

Visiting Galleries Cost 6 ,050

Non-Manufacturing Costs 32 ,050

Question 2

Income Statement for year ended 31st December 2000 Contribution Format

Sales (5 x 680 x 40 ) 136 ,000

Variable Costs (see note 2 ) 120 ,000

Contribution 16 ,000

Fixed Costs (see note 3 ) 24 ,050

Net (Loss (8 ,050 Source : Lucey Terry 2003 ,

348

Note 2

Production Costs 500 x 5 bundles x 40 weeks 100 ,000

Sam 's Wage 20 x 5 bundles x 40 weeks 4 ,000

Shipping Costs 80 x 5 bundles x 40 weeks 16 ,000

Variable Costs 120 ,000

Note 3

Production Costs 300 x 40 weeks 12 ,000

Sam 's Wage 6 ,000

Visiting Galleries Cost 6 ,050

Fixed Costs 24 ,050

Question 3 Question 4

As we can see from the income statements prepared in the previous questions , Harry Huffnpuff Glassblowing is presently incurring a loss The income statement under the marginal costing approach , which classifies the costs is an easier way to analyze the situation at hand portrays that the selling price is covering the variable expenditure leading to a contribution of 80 per bundle . The problem rests on the coverage of fixed costs (Lucey Terry 2003 ,

343-344 . The suggestions should thus focus on this issue

The background information provided stated that the product manufactured by the company is...