margin, as reported in the "Total" column, to determine operating income. Kimbrell Inc. Variable Costing Income Statement For the Year Ended December 31, 2048 Size S Size M Size L Sales $ 990,000 $1,087,500 $ 945,000 Total $3,022,500 Variable cost of goods sold 538,500 718,500 567,000 1,824,000 Manufacturing margin $ 451,500 369,000 $ 378,000 1,198,500 Variable operating expenses 118,100 108,750 85,050 311,900 333,400 $ 260,250 $ 292,950 886,600 Contribution margin Fixed costs: Manufacturing costs Operating expenses Total fixed costs Operating income Feedback Check My Work 1 Cable I Proposal 2 is selected and size M is discontinued and production curtalled, the annual fixed production costs and fixed operating expenses could be reduced by $142,500 and $28,350, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of $85,050 for the salary of an assistant brand manager (classified as a fixed operating expense) would yield an additional 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 December 31, 2048, is as follows: Size Total SSM $990,000 $1,087,500 Sales $945,000 $3,022,500 Cost of goods sold: Variable costs Fixed costs Total cost of goods sold Gross profit $(538,500) (241,000) $(779,500) $210,500 $(718,500) $(567,000) $(1,824,000) (288,000) (250,000) (779,000) $(1,006,500) $(817,000) $(2,603,000) $81,000 $128,000 $419,500 Operating expenses: Variable expenses Fixed expenses Total operating expenses $(118,100) (32,125) $(150,225) $60,275 $(108,750) (42,525) $(151,275) $(70,275) $(85,050) (14,250) $(99,300) $28,700 $(311,900) (88,900) $(400,800) $18,700 Operating income (loss) Required