PR 21-5A Segment variable costing income statement and effect on operating income of change in operations V1. Contribution Valdespin Company manufactures three sizes of camping tents - small (S), medium (MD, and large (C). margin, Size S, The income statement has consistently indicated a net loss for the M size, and management is consid$235,520 ering three proposals (1) continue Sire M, (2) discontinue Sire M and reduce total output accurdingly. or (3) discontinue Size M and conduct an advertising cimpaign to cxpand 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 $46,080 and $32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional anneal expenditure of $31,560 for the rental of additional warehouse space would yield an additional 130 in sine 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 foresecable future. The income statement for the past year ended June 30 . 2079 , is as follows: 1. rrepare an income statement for the past year in the variable costing format. Wse the following headings: Slat5 Data for each size should be reported through contribution aurgin. The fixed costs should be deducted from the total contribition margin, as reported in the Total colunin, to determine operating income. 2. Based on the income statement prepared in (1) and the other dati presented, determine the amount by which total annual operating income would be reduced below its present level if: Proposal 2 is accepted. 3. Prepare an income statement in the variable costing formaf, indicuting the projected annaar operating income if Proposal 3 is accepted. Use the following headings? 5SireLotal Data for each style should be reported through contribution amargin. The fixed coces should be: deducted froen the total contribution margin as feported in the "Total column. For purpotes of this problem, the expenditure of $34.560 for the rental of additional warehouse spice can be added to the fixed operating expenses. 4. By how much would total annual operating income incnase above its presene level if. Proposal 3 is accepted? Explain. PR 21-5A Segment variable costing income statement and effect on operating income of change in operations V1. Contribution Valdespin Company manufactures three sizes of camping tents - small (S), medium (MD, and large (C). margin, Size S, The income statement has consistently indicated a net loss for the M size, and management is consid$235,520 ering three proposals (1) continue Sire M, (2) discontinue Sire M and reduce total output accurdingly. or (3) discontinue Size M and conduct an advertising cimpaign to cxpand 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 $46,080 and $32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional anneal expenditure of $31,560 for the rental of additional warehouse space would yield an additional 130 in sine 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 foresecable future. The income statement for the past year ended June 30 . 2079 , is as follows: 1. rrepare an income statement for the past year in the variable costing format. Wse the following headings: Slat5 Data for each size should be reported through contribution aurgin. The fixed costs should be deducted from the total contribition margin, as reported in the Total colunin, to determine operating income. 2. Based on the income statement prepared in (1) and the other dati presented, determine the amount by which total annual operating income would be reduced below its present level if: Proposal 2 is accepted. 3. Prepare an income statement in the variable costing formaf, indicuting the projected annaar operating income if Proposal 3 is accepted. Use the following headings? 5SireLotal Data for each style should be reported through contribution amargin. The fixed coces should be: deducted froen the total contribution margin as feported in the "Total column. For purpotes of this problem, the expenditure of $34.560 for the rental of additional warehouse spice can be added to the fixed operating expenses. 4. By how much would total annual operating income incnase above its presene level if. Proposal 3 is accepted? Explain