Cheertime Company produces three lines of greeting cards scented, musical, and regular. There are common fixed expenses of $7,500 (meaning this expense is applied only 1 time no matter if the company produces one line or all three lines). The additional financial information for all three lines is below: Scented: Sales $ 10,000 Variable expenses $ 7,000 Advertising $ 4,000
Musical: Sales $ 15,000
Variable expenses $ 12,000
Advertising $ 5,000
Regular: Sales $ 25,000
Variable expenses $ 12,500
Advertising $ 3,000
With the current financial information, Cheertime's current operating income is a loss of $1,000. For 2022, the president of Cheertime is considering two alternatives to cut down on losses 1) completely eliminating the scented and musical card lines which she projects will decrease the sales and variable expenses of the regular greeting card line by 20%. Or 2) Increasing advertising by $250 for the scented line and $750 for the musical line which she projects will increase the sales and variable expenses of BOTH of these lines by 30%. 1. Create an income statement below for the first alternative. Formulas should be used in the cells for all calculations and proper accounting protocols should be followed. The following items are the accounts for the income statement (they are not listed in order here, but must be in the correct order on your income statement!). Sales Variable expenses Contribution margin Advertising Common fixed expenses Operating income