Professional Documents
Culture Documents
Soccer Ball Inc., a manufacturer of youth soccer balls, prepared the income statement for the year ended
December 31, 2016 (see Exhibit 1):
The company sells soccer balls to schools, childrens sports teams, and sporting goods stores which
represents 4 segments. The selling price per unit is $5. The cost of sales is all variable.
Large public and private schools receive advertising through educational media, and place orders directly
to the manufacturing plant. No sales Staff calls are made. Orders are received through the mail, fax,
telephone or by computer. School districts arrange for their own delivery and send a truck to the plant to
pick up orders when they are ready.
Smaller private schools located with 100 mile radius of then plant are visited by salesmen. These
salesmen are paid commissions, and are not company employees.
Sporting goods stores within a 400 miles radius of the plant are visited by 4 salesmen who are company
employees and are paid a salary.
Childrens sports teams within 600 miles radius of the plant are contacted through a sports consortium
which sells to leagues. Advertising is done through sports industry media. The cost of that advertising is
shared 50/50 with the sports consortium. The sports consortium receives a commission on their sales.
2
The Sales manager oversees the sales to all segments and his work benefits all segments based on their
volume of activity. General business support
Soccer balls are sold in containers of three (3) different sizes: namely, 16s (small), 32s (medium), and
48s (large). Each order is comprised of a cases lot of o appropriate containers. The units associated with
the packaging each case are depicted in Exhibit 2.
Exhibit 2
In addition, delivery freight is charged to Soccer Inc., based on the number of containers shipped and
delivery miles.
During 2016, an analysis of the marketing operations was made. Exhibit 3 shows the results of that
analysis.
Exhibit 3
Required
1. Prepare a statement showing the profitability of each type of sales, i.e., large schools, small
private schools, sporting goods stores, and sports team sales. Prepare supporting schedules to
show the allocation of cost items. Describe the basis on which costs were assigned or allocated to
each. (hint: freight costs are charged based on the number of containers shipped and miles driven.
To allocate freight costs to customers the number of containers times the number of miles radius
of the plant is appropriate) 80 points
2. Prepare a partial statement showing the gross profit (sales less cost of goods sold) of each
container size of balls sold. 20 points