Studemeir Paint & Floors (SPF) is a retail store specializing in home improvement. The store has experienced net operating losses in itsOther Flooring Products line during the last few periods. SPF's management team thinks that the store will improve its profitability if itstops carrying the Other Flooring Products line. The operating results from the most recent period are:Paint andPaintSupplies$ 290,300119,000OtherFlooringProducts$ 167,000131,000SalesCost of goods soldSPF estimates that store operating expenses are approximately 25% of revenues.Harish Rana, SPF's controller, states that while every sale has one purchase order, not every sales dollar requires or uses the sameamount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows:Carpet$ 258,000169,000Paint and PaintSupplies313460.50Activity (cost driver)Order processing (number of purchase orders)Receiving (number of deliveries)Customer support (hours required per sale)Harish estimates activity-cost rates for each activity as follows:Order processing$ 145 per purchase orderReceiving20020per deliveryCustomer supportper hourCarpet2142004.0Other FlooringProducts120700.65Required:1. Prepare a product-line profitability report for SPF under the current costing system.2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.

Name: Studemeir Paint & Floors (SPF) is a retail store specializing in home
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Description: Studemeir Paint & Floors (SPF) is a retail store specializing in home improvement. The store has experienced net operating losses in itsOther Flooring Products line during the last few periods. SPF's management team thinks that the store will improv

A product line shows the products that are similar. Thus, if a company provides a variety of goods…

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Required: 1. Prepare a product-line profitability report for SPF under the current costing system. 2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.

Required: 1. Prepare a product-line profitability report for SPF under the current costing system. 2. Prepare a product-line profitability report for SPF using the ABC information the controller provides.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 13E: Bannister Company, an electronics firm, buys circuit boards and manually inserts various electronic...

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Studemeir Paint & Floors (SPF) is a retail store specializing in home improvement. The store has experienced net operating losses in its Other Flooring Products line during the last few periods. SPF’s management team thinks that the store will improve its profitability if it stops carrying the Other Flooring Products line. The operating results from the most recent period are: Paint and Paint Supplies Carpet Other Flooring Products Sales $ 193,700 $ 218,000 $ 197,000 Cost of goods sold 127,000 149,000 158,000 SPF estimates that store operating expenses are approximately 25% of revenues. Harish Rana, SPF’s controller, states that while every sale has one purchase order, not every sales dollar requires or uses the same amount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows: Activity (cost driver) Paint and Paint Supplies Carpet Other Flooring Products Order processing (number of purchase orders) 385 133 120 Receiving…
Studemeir Paint & Floors (SPF) has experienced net operating losses in its Other Flooring Products line during the last few periods. SPF’s management team thinks that the store will improve its profitability if it discontinues the Other Flooring Products line. The operating results from the most recent period are: Paint and Paint Supplies Carpet Other Flooring Products Sales $ 375,500 $ 201,000 $ 152,000 Cost of goods sold 151,000 128,000 117,000 SPF estimates that store support expenses are approximately 24% of revenues. Harish Rana, SPF’s controller, states that while every sale has one purchase order, not every sales dollar requires or uses the same amount of store support activities. He conducts a preliminary investigation and his results and analysis are as follows: Activity (cost driver) Paint and Paint Supplies Carpet Other Flooring Products Order processing (number of purchase orders) 360 157 120 Receiving…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Frozen Foods Baked Goods Fresh Produce Sales $ 120,000 $ 91,000 $ 158,175 Cost of goods sold 105,000 67,000 110,000 SFS estimates that store support expenses, in total, are approximately 20% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Activity (cost driver) Frozen Foods Baked Goods Fresh Produce Order processing (number of purchase orders) 10 45 100 Receiving (number of deliveries) 12 55 120 Shelf-stocking (number of hours per delivery) 2 0.5 4 Customer…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Sales Cost of goods sold Frozen Foods Baked Goods Fresh Produce 238000 381,000 416000 221,000 308,000 321,000 SFS estimates that store support expenses, in total, are approximately 13% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: ences Activity (cost driver) Order processing (number of purchase orders) Receiving (number of deliveries) Shelf - stocking (number of hours per delivery) Customer support ( total units sold) Frozen Baked Foods Goods 11 62 1375 5 0.2 27,000 38,000 Fresh Produce 107 254 7 76,000 The controller estimates activity - cost…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Frozen Foods Baked Goods Fresh Produce Sales $ 164,000 $ 198,000 $ 262,000 Cost of goods sold 150,000 160,000 200,000 SFS estimates that store support expenses, in total, are approximately 15% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Activity (cost driver) Frozen Foods Baked Goods Fresh Produce Order processing (number of purchase orders) 11 54 95 Receiving (number of deliveries) 12 71 172 Shelf-stocking (number of hours per delivery) 6 0.2 7 Customer support (total units sold) 20,000 37,000 74,000 The…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Sales Cost of goods sold Frozen Foods $ 238,000 221,000 Baked Goods Fresh Produce $ 381,000 308,000 $416,000 321,000 SFS estimates that store support expenses, in total, are approximately 13% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Activity (cost driver) Order processing (number of purchase orders) Receiving (number of deliveries) Shelf-stocking (number of hours per delivery) Frozen Baked Fresh Foods Goods Produce 11 62 107 13 75 254 5 0.2 27,000 38,000 76,000 Customer support (total units sold) The controller estimates activity-cost rates for…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods. Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most recent period are: Order processing Receiving Shelf-stocking Customer support Sales Cost of goods sold SFS estimates that store support expenses, in total, are approximately 20% of revenues. The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis reveals store support activities for these three product lines are: Frozen Foods $ 120,000 185,000 Activity (cost driver) Order processing (number of purchase orders) Receiving (number of deliveries) Shelf-stocking (number of hours per delivery) Customer support (total units sold) The controller estimates activity-cost rates for each activity as follows: $ 88 per purchase order 110 per delivery per hour per item…
Check m Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses $2,050,000 876,050 1,173,950 1,315,000 $ (141,050) Operating loss In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following: Geographic Market Central South North Sales Variable expenses as a percentage of sales Traceable fixed expenses $605,000 $804,000 $641,000 34% $315,000 $500,000 $305,000 53% 44% Required: 1. Prepare a contribution format income statement segmented by geographic market, as requested by the president Geographic Market Total South Central North Company
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Suppose Grainy Day is considering discontinuing its tasty loops product line. Assume that during the past year, the tasty loops' product line income statement showed the following: A B 1 Sales revenue $7,550,000 2 Less: Cost of goods sold 6,400,000 3 Gross profit 1,150,000 4 Less: Operating expenses 1,650,000 5 Operating income (loss) $(500,000) Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the tasty loops line is just one of the company's cereal operations, only $780,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Grainy Day discontinue the tasty loops product line?
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Bovine Company, a wholesale distributor of DVDs, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement below:Sales $1,500,000 Variable expenses 588,000 Contribution margin 912,000 Fixed expenses 945,000 Net operating loss $ (33,000)In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following data:Geographic Market South Central North Sales $400,000 $600,000 $500,000 Variable expenses as a percentage of sales 52% 30% 40% Traceable fixed expenses $240,000 $330,000 $200,000Required: i. Prepare a contribution format income statement segmented by geographic market, as desired by the president. ii. The company’s sales manager believes that sales in the Central geographic market could be increased by 15% if monthly advertising were increased by $25,000. Would you recommend the increased advertising? Show…