monthly income sta Headphones acturing Company is given below: Department A Department B (S) 406,650 Total (S) 600,340 (S) 1,006,990 Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income 676,530 330,460 300,000 30,460 256,530 150,120 420,000 180,340 100,000 50,120 200,000 (19,660) 20.870 29,250 29.130 (48,790) 500 (19,540) Due to its poor result, consideration is being given to closing Department B. Studies show that if Department B is closed, 20% of its traceable fixed expenses will continue unchanged. The studies also show that closing Department B would result in a 5 percent decrease in sales in Department A. The company allocates common fixed expenses to the departments on the basis of sales dollars. Required: c) The company has done a detailed investigation to the production in Department A. Currently, department produces 4 products as follow: A D Selling price per unit Variable manufacturing cost per unit Variable selling cost per unit Machine time per unit Monthly demand in units |Current monthly production and sales $42.3 $20.8 $50 $37.6 $30.5 $30.7 $21 $19.9 $2.7 $2.1 $1 $2.4 3.3 4.1 2.6 1.3 1,000 4,000 3,000 3,000 1,000 4,00 | 2,100 Department A has a constraint of 28,930 minutes of machine time for a month. i. If Department A has been fully utilizing the machine time available, how many units of Product C are produced and sold per month currently? ii. Show your analysis and rank the products to maximize the total contribution margin of the Department A with respect to the constraint. iii. Has the Department A made best use of the limited machine time to achieve the highest contribution margin? If no, compute the number of units that should be produced for each product.
monthly income sta Headphones acturing Company is given below: Department A Department B (S) 406,650 Total (S) 600,340 (S) 1,006,990 Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income 676,530 330,460 300,000 30,460 256,530 150,120 420,000 180,340 100,000 50,120 200,000 (19,660) 20.870 29,250 29.130 (48,790) 500 (19,540) Due to its poor result, consideration is being given to closing Department B. Studies show that if Department B is closed, 20% of its traceable fixed expenses will continue unchanged. The studies also show that closing Department B would result in a 5 percent decrease in sales in Department A. The company allocates common fixed expenses to the departments on the basis of sales dollars. Required: c) The company has done a detailed investigation to the production in Department A. Currently, department produces 4 products as follow: A D Selling price per unit Variable manufacturing cost per unit Variable selling cost per unit Machine time per unit Monthly demand in units |Current monthly production and sales $42.3 $20.8 $50 $37.6 $30.5 $30.7 $21 $19.9 $2.7 $2.1 $1 $2.4 3.3 4.1 2.6 1.3 1,000 4,000 3,000 3,000 1,000 4,00 | 2,100 Department A has a constraint of 28,930 minutes of machine time for a month. i. If Department A has been fully utilizing the machine time available, how many units of Product C are produced and sold per month currently? ii. Show your analysis and rank the products to maximize the total contribution margin of the Department A with respect to the constraint. iii. Has the Department A made best use of the limited machine time to achieve the highest contribution margin? If no, compute the number of units that should be produced for each product.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter25: Departmental Accounting
Section: Chapter Questions
Problem 3CE
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Question
Transcribed Image Text:The most recent monthly income statement for Headphones Manufacturing Company is given
below:
Department A Department B
(S)
600,340
Total
(S)
1,006,990
(S)
Sales
406,650
Variable expenses
Contribution margin
Traceable fixed expenses
Segment margin
Common fixed expenses
Net operating income
256.530
420.000
180,340
676,530
150,120
330,460
100,000
50,120
200.000
(19,660)
300,000
30,460
20.870
29.130
50,000
29,250
(48,790)
(19,540)
Due to its poor result, consideration is being given to closing Department B. Studies show that
if Department B is closed, 20% of its traceable fixed expenses will continue unchanged. The
studies also show that closing Department B would result in a 5 percent decrease in sales in
Department A. The company allocates common fixed expenses to the departments on the basis
of sales dollars.
Required:
c) The company has done a detailed investigation to the production in Department A. Currently,
department produces 4 products as follow:
A
B
Selling price per unit
Variable manufacturing cost per unit
Variable selling cost per unit
Machine time per unit
|Monthly demand in units
| Current monthly production and sales
$42.3
$50
$37.6
$30.5
$20.8
$30.7
$21
$19.9
$2.7
$2.1
$1
$2.4
3.3
4.1
2.6
1.3
1,000
4,000
3,000
3,000
1,000
4,000
?
2,100
Department A has a constraint of 28,930 minutes of machine time for a month.
i. If Department A has been fully utilizing the machine time available, how many units
of Product C are produced and sold per month currently?
ii. Show your analysis and rank the products to maximize the total contribution margin
of the Department A with respect to the constraint.
iii. Has the Department A made best use of the limited machine time to achieve the
highest contribution margin? If no, compute the number of units that should be
produced for each product.
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