Medford Mug Company
The Medford Mug Company is an old-line maker of ceramic coffee mugs. It imprints company logos and other sayings on mugs for both commercial and wholesale markets. The firm has the capacity to produce 50 million mugs per year, but the recession has cut production and sales in the current year Q to 15 million mugs. The accompanying table shows the operating statement for 2016.
Chapter 10
MEDFORD MUG COMPANY
Income Statement
Year Ending 2016 ($ in Millions)
Sales (15 million @ $2) $ 30.0
Less costs of goods sold
Variable cost (15 million <8> $0.50) (7.5)
Fixed cost (20.0) (27.5)
Gross margin $ 2.5
Less selling and administration (4.0)