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Segmented Income Statements, Product-Line Analysis

Alard Company produces blenders and coffee makers. During the past year, the company produced and sold 65,000 blenders and 75,000 coffee makers. Fixed costs for Alard totaled $340,000, of which $184,000 can be avoided if the blenders are not produced and $142,500 can be avoided if the coffee makers are not produced. Revenue and variable cost information follows:

	Blenders	Coffee Makers
Selling price per appliance	$24	$29
Variable expenses per appliance	18	27

Required:

1. Prepare segmented income statements. Separate direct and common fixed costs. Enter all amounts as positive numbers.

Alard Company
Segmented Income Statement
	Blenders	Coffee Makers	Total
	$	$	$
	$	$	$
	$	$	$
			$

2. What would the effect be on Alards profit if the coffee maker line is dropped? The blender line?

If the coffee maker line is dropped, profits will by $, the segment margin. If the blender line is dropped, profits will by $.

3. What would the effect be on firm profits if an additional 10,000 blenders could be produced (using existing capacity) and sold for $21.50 on a special-order basis? Existing sales would be unaffected by the special order. Enter all amounts as positive numbers.

Alard Company
Segmented Income Statement
	Blenders	Coffee Makers	Total
	$	$	$
Contribution margin	$	$	$
Segment margin	$	$	$
			$

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