All Weather Company makes umbrellas and outerwear items for rainy and snowy days. It had the following cost structure for the past year:

a. What is the product cost per unit and gross margin per unit for each product line under the traditional (functional) income statement format?

b. What is the variable cost per unit and the contribution margin per unit for each product line under the contribution margin income statement format?

c. What are the differences in classification of costs between the traditional (functional) income statement and the contribution margin income statement?

d. The allocated fixed administrative costs represent costs that must be covered but do not vary regardless of the product line. Such costs would include executive salaries, corporate costs of depreciation, utilities, accounting services, legal services, insurance, and property taxes. Why would it be important to distinguish between the direct fixed selling and administrative costs and the allocated administrative costs?

e. Consider the cost-benefit analysis. If you were the manager, what information would you seek in deciding whether it was necessary to refine the analysis further by breaking down the clothing into boots versus coats?

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Items Units produced and sold Average sales price per unit Direct materials cost per unit Direct labor cost per unit Variable overhead per unit Umbrellas 100,000 $12 $3 $1.50 $0.60 Clothing 10,000 $75 $16 $5.50 $3.50 Total 110,000 $1,950,000 $460,000 $205,000 $95,000