Reference no: EM132793029

Question - C Cosmetics has three major product line, Hair Care, Facial Care and Skin Care. The following statement of profit or loss for the year ended April 30, 2019, was prepared by product line, using the full cost allocation.

Explanatory data are as follows:

(a) Cost of goods sold. The company's inventories of materials and finished products do not vary significantly from year to year. Factory overhead was applied to products at 120% of direct labor costs. The factory overhead costs for the year were as follows:

Variable indirect labor and supplies P 50,000

Variable employee benefits on factory labor 30,000

Supervisory salaries and related benefits 100,000

Plant occupancy cost P 180,000

Explanatory data are as follows (continuation):

There was no over- or - underapplied factory overhead at year-end.

a. Advertising. The company has been unable to determine any direct causal relationship between the level of sales volume and the level of advertising expenditures. However, because management believes advertising is necessary, an annual advertising program has been implemented for each product line, independent of the other.

b. Commissions. Sales commissions are paid to the sales force at the rate of 5% on the hair care and 10% on the facial care and skin care.

c. Licenses. Various licenses are required for each product line, renewed annually for each product line at a fixed amount.

b. Salaries and related benefits. Sales and general and administrative personnel devote time and effort to all product lines. Their salaries and wages are allocated on the basis of management's estimates of time spent on each product line.

c. Fixed factory overhead, salaries and related benefits for sales and general and administrative personnel are not traceable to individual lines on any objective basis.

Required - Prepare a product-line income statement, using the contribution margin approach.