Exercise 23-8 Segment elimination P4 Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $300,000 of its fixed costs are avoidable. (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be eliminated? Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) $980,000 700,000 280,000 340,000 $ (60,000) Page 923

Exercise 23-8 Segment elimination P4 Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $300,000 of its fixed costs are avoidable. (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be eliminated? Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) $980,000 700,000 280,000 340,000 $ (60,000) Page 923

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter18: Activity-Based Costing

Section: Chapter Questions

Problem 18.17EX: Evaluating selling and administrative cost allocations Gordon Gecco Furniture Company has two major...

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Question 18 Sondela Ltd is a manufacturing company that is planning to use the cost-plus pricing method to set the selling price. The company has provided the following data: Variable cost per unit: Direct material R30 Direct labour R45 Manufacturing overheads R75 Sales commission R15 Selling expenses R23 Total fixed costs Depreciation - factory R27 000 Depreciation - administration R45 000 Rent - factory R31 500 Rent - head office R22 500 Selling and administration cost R60 000 Required: (b) Calculate the selling price if the company adds mark-up of…
QUESTION 25 A product called Wallaby has revenue of $1,250,000, variable costs of goods sold of $850,000, variable selling expenses of $275,000, and fixed costs of $225,000, creating an operating loss of $(100,000). Using differential analysis, the Company will determine whether product Wallaby should be continued or discontinued, assuming fixed costs are unaffected by the decision. What amount for the variable cost of goods sold should be used in analyzing the alternative to discontinue product Wallaby? $0 O $425,000 This is not a choice. $850,000
Question 12 Sondela Ltd is a manufacturing company that is planning to use the cost-plus pricing method to set the selling price. The company has provided the following data: Variable cost per unit: Direct material R30 Direct labour R45 Manufacturing overheads R75 Sales commission R15 Selling expenses R23 Total fixed costs Depreciation - factory R27 000 Depreciation - administration R45 000 Rent - factory R31 500 Rent - head office R22 500 Selling and administration cost R60 000 Required: (c) Calculate the selling price if the company adds mark-up of…
Ch. 7 Incremental Analysis pg 467 Segment Income Statement Please provide the answer and explain the answer to the following question with the information given below. "Big Tent Company is trying to decide whether to keep or drop one of its outdoor wedding tents. The company's segmented income statement shows that this product is generating a net loss as follows:" Sales Revenue: $100,000 Less: Variable Costs $70,000 Contribution Margin $30,000 Less: Direct Fixed Costs $10,000 Segment Margin $20,000 Less: Allocated common fixed costs $30,000 Net Operating Income $(10,000) The company estimates that eliminating this product line will increase the contribution margin on a related product line by $25,000. Based on this information, what impact would dropping the line have on the company's overall profitability?
Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,700 3,400 8,700 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.50 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost a. Should Rooney continue to make the containers? b. Total avoidable cost Yes b. Should Rooney continue to make the…
Required information Problem 18-4A (Static) Break-even analysis, different cost structures, and income calculations LO C2, A1, P2 [The following information applies to the questions displayed below.] Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Income statements for each product follow. Sales Variable costs. Contribution margin Fixed costs Income Problem 18-4A (Static) Part 3 Sales Variable cost Contribution margin Carvings $ 2,000,000 1,600,000 400,000 125,000 $ 275,000 3. Assume that the company expects sales of each product to increase to 60,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). Fixed costs Income (loss) Units Mementos $ 2,000,000…
CONTINUE OR DISCONTINUE OPERATING A BUSINESS SEGMENT Beth Neri Enterprises sells three products, Skinny, Bony and Thinny. Beth, the proprietor, is concerned about the losses incurred by Thinny, and is considering to discontinue its production and sales. Sales and costs data about Beth Neri's three products are as follows: Skinny P 5 Bony P 7 Thinny P 9 Total P 21 Sales Variable cost per unit Contribution margin 12 4 2 9. Fixed cost per unit Profit (loss) per unit Р 2 P 2 P( 1) P 3 Fixed costs are allocated among the three products based on the floor area they occupy. Beth is thinking that if she would eliminate Thinny, its loss of P1 per unit would likewise be eliminated thereby increasing her total profit per unit from P3 [P2 + P2 - P1] to P4 [P2 + P2]. Is Beth's analysis correct?
Evaluating selling and administrative cost allocations Gordon Gecco Furniture Company has two major product lines with the following characteristics: Commercial office furniture: Few large orders, little advertising support, shipments in full truckloads, and low handling complexity Home office furniture: Many small orders, large advertising support, shipments in partial truckloads, and high handling complexity The company produced the following profitability report for management: The selling and administrative expenses are allocated to the products on the basis of relative sales dollars. Evaluate the accuracy of this report and recommend an alternative approach.
Problem 17-2 (LO 17-1) A service company has the... A service company has the following financial information (in millions of $) Sales $510 210 Cost of outsourced facilitating goods Cost of in-house services provided Administrative costs 199 77 Pretax earnings 24 (Round answers to 1 decimal place.) a. What is the profit leverage effect of reducing the cost of the facilitating goods in this company? b. It has been suggested that the in-house services costs could be reduced by 10 percent in the coming year by implementing lean systems. What effect would this have on earnings increase in percentage? c. What is the profit leverage effect of in-house services relative to profits?
Item8 2.5 points Return to questionitem 8 Exercise 11-19A (Algo) Margin of safety LO 11-6 Information concerning a product produced by Ender Company appears here: Sales price per unit $172 Variable cost per unit $91 Total annual fixed manufacturing and operating costs $502,200 Required Determine the following: Contribution margin per unit. Number of units that Ender must sell to break even. Sales level in units that Ender must reach to earn a profit of $291,600. Determine the margin of safety in units, sales dollars, and as a percentage. a. Contribution margin per unit. b. Number of units that Ender must sell to break even. c. Sales level in units that Ender must reach to earn a profit of $291,600. a. Contribution margin b. Break-even in units c. Break-even in units to earn profit of $291,600 Determine the margin of safety in units, sales dollars, and as a percentage. Note: Round "Percentage" answer to 1 decimal place ( I.e., 0.234 should be entered as 23.4). Units? Sales ? Percentage…
Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $285 $1,750 Less: Variable expenses 1,115 45 200 1,360 Contribution margin $165 $140 $85 $390 Less direct fixed expenses: Depreciation 50 15 9 74 Salaries 95 85 112 292 Segment margin $20 $40 $(36) $24 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that, each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Assume that 20% of the Alanson customers choose to buy from Petoskey because it offers a full range of products, including Conway. If Conway were no longer available…
4:24 ces M Question Mode: M... E6-24 (Algo) Computing Target Profit, Preparing Contribution Margin Income Statement, Computing Margin of Safety [LO 6-2, 6-3] Required: 1. Calculate break-even sales for Erin Shelton, Incorporated. 2. Prepare a contribution margin income statement on the basis of break-even sales. 3. Calculate the required sales to meet the target profit of $930,000. 4. Prepare a contribution margin income statement based on sales required to earn a target profit of $930,000. 5. When the company earns $930,000 of net income, what is its margin of safety and margin of safety as a percentage of sales? Erin Shelton, Incorporated, wants to earn a target profit of $930,000 this year. The company's fixed costs are expected to be $1,260,000 and its variable costs are expected to be 60 percent of sales. Erin Shelton, Incorporated, earned $830,000 in profit last year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Break-Even…