Author Question: Adele Truff designs and manufactures a variety of personal products including wallets, purses, and ... (Read 38 times)

blinding37 · **on:** Feb 5, 2023

Adele Truff designs and manufactures a variety of personal products including wallets, purses, and key chains. Adele is proposing to begin manufacturing smart phone covers which sell for $25 each. Adele estimates that monthly sales volume will be 8,500 units. Variable product costs will be $15.50 per unit and fixed overhead will be $5.20 per unit. Half of the fixed overhead is directly traceable to the smart phone cover line. To promote the covers, Adele proposes a $1.25 per unit commission to the company's salespeople and a $7,500 per month advertising campaign. In compliance with corporate policy, the smart phone cover line will also be allocated $15,000 in fixed corporate support costs.

Required

a.	Prepare a traditional monthly income statement for the smart phone cover line.

b.	Prepare a monthly income statement that highlights the proposed smart phone cover

line's segment margin.

c.	Which income statement would you recommend that Adele use when pitching the

proposed line to company managers? Why would you recommend she use this statement?

kuttz · **Reply #1 on:** Feb 5, 2023

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