Exhibit 7-4
the Following Segmented Annual Income Statement Is for Paper

question 55

Multiple Choice

Exhibit 7-4
The following segmented annual income statement is for Paper Products,Inc.
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Product Lines }$
$\begin{array}{lrrrr}& \text { Plain } & \text { Lined } & \text { Color } & \text { Total }\\\text { Sales revenue } & \$ 25,000 & \$ 100,000 & \$ 125,000 & \$ 250,000 \\\text { Variable costs } & 15,000 & 50,000 & 85,000 & 150,000\\\text { Contribution margin } & \$ 10,000 & \$ 50,000 & \$ 40,000 & \$ 100,000 \\\text { Direct fixed costs } & 4,000 & 6,000 & 9,000 & 19,000\\\text {Allocated fixed costs }&\underline{\quad?\quad}&\underline{\quad?\quad}&\underline{\quad?\quad}&\underline{45,000}\\\text {Profit (loss) }&\underline{\$\quad?\quad}&\underline{\$\quad?\quad}&\underline{\$\quad?\quad}&\underline{\$\quad?\quad}\end{array}$

-Refer to Exhibit 7-4.If allocated fixed costs are based on sales revenue for each product line as a proportion of total sales revenue,what is the amount of allocated fixed costs for Lined?

• A)$18,000
• B)$44,000
• C)$22,500
• D)$15,000
• E)None of the answer choices is correct.

Learn about various components of a budget including operating, cash, merchandise purchases, and capital expenditure budgets.

Comprehend the processes involved in preparing a cash budget, including cash inflows and outflows.

Understand how to project cash receipts based on sales and credit terms.

Learn the sequential order of budget preparation and its components like sales budget, merchandise purchases budget, and cash budget.

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Definitions:

Special Journals

Accounting books designed for recording specific types of transactions, such as sales, purchases, cash receipts, and cash disbursements.

Special Journals

Accounting journals designed for recording a specific type of transaction consistently, such as sales or purchases, for efficient processing.

General Journal

The primary accounting record where all financial transactions of a business are initially recorded before summarizing.

Cost Effectiveness

An assessment of the financial viability of a project, product, or measure based on the costs incurred versus the benefits achieved.