Reference no: EM13569895

Segment variable costing income statement and effect on income of change in operations Extreme Camping Company manufactures three sizes of extreme weather tents-small (S), medium (M), and large (L). The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by $57,600 and $40,300, respectively.

If Proposal 3 is selected, it is anticipated that an additional annual expenditure of $43,200 for the rental of additional warehouse space would yield an increase of 130% in Size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M. The sales and costs have been relatively stable over the past few years, and they are expected to remain so for the foreseeable future. The income statement for the past year ended June 30, 2012, is as follows: Hide Hint(s) 1. Prepare an income statement for the past year in the variable costing format. Enter all amounts as positive numbers. Extreme Camping Company Contribution Margin by Size Segment For the Year Ended June 30, 2012 Size S Size M Size L Total Sales $ $ $ $ Variable cost of goods sold Manufacturing margin $ $ $ $ Variable operating expenses Contribution margin $ $ $ $ Fixed costs: Manufacturing costs $ Operating expenses Total fixed costs $ Income from operations $?