Problem 22.2A (Static) Preparing and Using Responsibility Income Statements (L022-3, L022-4, L022- 5) Darby Press publishes two lines of booksfiction and nonction. Cost and revenue data for each product line for the current month are as follows. Product Lines Fiction Nonfiction Sales $ 833,333 $ 333,333 Variable costs as a percentage of sales 63% 23% Fixed costs traceable to product lines $ 33,333 $ 125,333 In addition to the costs shown, the company incurs monthly fixed costs of $260,000 common to both product lines. Required: a. Prepare the company's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b-1. Compute expected monthly increase (decrease) in operating income for both fiction and nonfiction assuming that a marketing survey shows that a $50,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $75,000. b-2. Based on the information given in requirement B1_, for which product line do you recommend this additional advertising ? c-1. Compute expected monthly increase (decrease) in operating income for both ction and nonction assuming that the management is considering expanding one of the company's two product lines. The plan under consideration is expected to increase the sales of the expanded product line by $100,000. It is also expected to increase the traceable fixed costs of the expanded product line by 55 percent. c-2. Based on the information provided in requirement (31., which product line do you recommend expanding? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C1 Req C2 Prepare the company's responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. (Round your percentage answers to the nearest whole percent.) Darby Press Responsibility Income Statement For the Current Month Entire Company Fiction Line Nonfiction Line Dollars Percent Dollars Percent Dollars Percent Sales $ 800,000 100 % $ 300,000 100 % $ 1, 100,000 100 % Variable costs 480,000 60 % 60,000 20 % 540,000 49 Contribution margin $ 320,000 40 % $ 240,000 80 % $ 560,000 51 % Fixed costs traceable to product lines 80,000 101% 125,000 42 205,000 19 % $ 240,000 30 % $ 115,000 38 % $ 355,000 32 % Income from operations $ 240,000 30 % Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C1 Req C2 Compute expected monthly increase (decrease) in operating income for both fiction and nonfiction assuming that a marketing survey shows that a $50,000 monthly advertising campaign focused on either product line should increase that product line's monthly sales by approximately $75,000. Fiction Nonfiction Expected monthly increase in contribution margin $ 30,000 $ 60,000 Less: Monthly increase in advertising expenditures 50,000 50,000 Expected monthly increase (decrease) in operating income $ (20,000) $ 10,000 Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C1 Req C2 Based on the information given in requirement B1., for which product line do you recommend this additional advertising ? Which product line do you recommend? Nonfiction Complete this question by entering your answers in the tabs below. Req A Reg 01 Reg I32 Reg (31 Reg C2 Compute expected monthly increase (decrease) in operating income for both ction and nonction assuming that the management is considering expanding one of die company's two product lines. The plan under consideration is expected to increase the sales of the expanded product line by $100,000. It is also expected to increase the traceable xed costs of the expanded product line by 55 percent. Show less; Expected monthly increase in contribution margin $ 40,000 $ 80,000 ess: Monthly increase in traceable xed costs 44,000 68,?50 Expected monthly increase (decrease) in operating income $ {4.000) $ 11,250 ( Reg 32 Reg C2 ) Complete this question by entering your answers in the tabs below. Reg A Req B1 Req B2 Req C1 Req C2 Based on the information provided in requirement C1., which product line do you recommend expanding? Which product line do you recommend expanding? Nonfiction Problem 22.5A (Algo) Analysis of Responsibility Income Statements (L022-3, L022-4, L022-5) Shown as follows are responsibility income statements for Buttereld, In-::_, for the month of March. Investment Centers Butter-Field, Inc Division 1 Division 2 Dollars % Dollars % Dollars % Sales :5 456,666 166.66% $ 316,666 166% $ 146,666 166% Variable costs 228,666 56.6? 186,666 66 42,666 36 Contribution margin :5 222,666 49.33% $ 124,666 46% $ 98,666 26% Fixed costs traceable to divisions 132,366 29.46 65,166 21 62,266 48 Division responsibility margin 55 89,266 19.93% $ 56,966 19% $ 36,666 22% Common fixed costs 46,666 8.89 Income from operations 55 49,266 11.64% Pro-Fit Centers Division 1 Product A Product B Dollars x Dollars % Dollars % Sales 5 316,666 166% $ 124,666 166.66% $ 186,666 166.66% Variable costs 186,666 66 55,866 45.66 136,266 26.66 Contribution margin 5 124,666 46% $ 68,266 55.66% $ 55,866 36.66% Fixed costs traceable to products 43,466 14 13,626 16.56 36,386 16.33 Product responsibility margin 3. 86,666 26% $ 55,186 44.56% $ 25,426 13.62% Common fixed costs 21,766 7" Responsibility margin for division $ 53,966 19% Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $2,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $160,000. x Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required E The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $2,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. Expected Change in Responsibility Margin Product 4,000 X A Product B 800 XRequired: 1:. The companyr plans to initiate an advertising campaign for one ofthe two products in Division 1. The campaign would cost $2,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that {'l} productA is advertised and {2} product 3 is advertised. 13. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the montth sales in Division 2 increase to $160,000. 0 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required E Prepare an income statement for Buttereld, Inc., by division, under the assumption that in April the monthlyr sales in Division 2 increase to $160,000. (Round your percentage answers to 2 decimal place (Le. 0.1234 should be considered as 12.34%).) O $500,000o 30 \"00,0009 10 Variable costs 0 240,000 9 48.00 0 30 180,000 9 60.00 0 '10 50,000 0 30.00 0 31, Contribution margin 0 5200.000 52.00 \"ii: $120,000 40.00 10 $140 000 r000 31, Fixed costs traceable to divisions 0 135.000 9 2?.00 9 30 53,000 9 21.00 0 10 r2000 0 30.00 0 10 Division responsibility margin 9 0125000 25.00 30 5 51000 19.00 10 0 00,000 34.00 10 Common costs 0 45.000 9 9.00 9 10 Income from operations a $ 30,000 16.00 \"ii