Reference no: EM13483575

Joe Coffee Cup Manufacturing Company has provided you the following information for the past three months. As a new company, month one was their first month of production (ie. They had zero inventory at the beginning of the month). Manufacturing capacity is 50,000 units per month and is the upper level of the relevant range for all costs listed below. They use a first in-first out inventory system. Sale price per insulated coffee cup is $10 USD.

Month One: Units produced 20,000, Units sold 10,000

Month Two: Units produced 10,000, Units sold 15,000

Month Three: Units produced 10,000, units sold 10,000

Variable Cost per unit:

Direct materials $3.75

Direct labor $1.25

Variable manufacturing overhead 1.00

Variable selling & administrative 1.50

Fixed Costs:

Fixed manufacturing overhead $20,000

Fixed selling & administrative $10,000

Joe has decided to begin producing non-insulated coffee cups in month four. Here is the updated info for the company beginning month four:
Insulated Non-Insulated
Selling price $10.00 $5.00
Units produced 15,000 20,000
Units sold 15,000 15,000
Variable costs:
Direct materials $3.75 $1.00
Direct labor $1.25 $1.00
Var mfg overhead $1.00 $0.50
Var selling & admin $1.50 $0.50
Traceable fixed expenses:
Traceable mfg overhead expenses $10,000 $ 5,000
Traceable selling & admin expense $ 5,000 $ 5,000

Common fixed expenses = $20,000 ($10,000 are mfg overhead expenses and $10,000 areselling & administrative overhead expenses)

1. Calculate the segment margin in month FOUR for the insulated cups division
2. Calculate the segment margin in month FOUR for the non-insulated cups division.
3. Calculate the net operating income total for month FOUR.