686,000) (1,806,000) Segment margin $2,324,000 $1,430,800 $3,754,800 Corporate fixed costs (2,660,000) (1,246,000) (3,906,000) Operating income (loss) $(336,000) $184,800 $(151,200)
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Product line
Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for the year are as follows:
| United States | Mexico | Total | |
|---|---|---|---|
| Sales | $10,080,000 | $5,040,000 | $15,120,000 |
| Variable costs | (6,636,000) | (2,923,200) | (9,559,200) |
| Contribution margin | $3,444,000 | $2,116,800 | $5,560,800 |
| Direct fixed costs | (1,120,000) | (686,000) | (1,806,000) |
| Segment margin | $2,324,000 | $1,430,800 | $3,754,800 |
| Corporate fixed costs | (2,660,000) | (1,246,000) | (3,906,000) |
| Operating income (loss) | $(336,000) | $184,800 | $(151,200) |
Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division’s direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland’s president is considering eliminating it.
a. If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland’s pre-tax income? $
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- ABC Co. produces products R, J, and C from a joint production process. Each product may be sold at the split-off point or be processed further. Joint production costs of $92,000 per year are allocated to the products based on the relative number of units produced. Data for ABC Co.'s operations for the current year are as follows: Product R J C с Units Produced 8,000 10,000 5,000 Allocated Joint Production Cost $32,000 40,000 20,000 Sales Value at Split-off $76,000 71,000 48,000 Product R can be processed beyond the split-off point for an additional cost of $26,000 and can then be sold for $105,000. Product J can be processed beyond the split-off point for an additional cost of $38,000 and can then be sold for $117,000. Product C can be processed beyond the split-off point for an additional cost of $12,000 and can then be sold for $57,000. Required: Which products should be processed beyond the split-off point? Show all of your work. ABC Inc. produces three products. Data concerning the…Cat Company produces products C, A, and T from a joint production process. Each product may be sold at the split-off point or be processed further. Joint production costs of $75,000 per year are allocated to the products based on the relative number of units produced. Data for Cat's operations for the current year are as follows: Units Allocated Joint Sales Value Product Produced Production Cost At Split-off C 12,000 $23,000 $80,000 A 8,000 34,000 71,000 T 13,000 18,000 51,000 Product C can be processed beyond the split-off point for an additional cost of $29,000 and can then be sold for $103,000. Product A can be processed beyond the split-off point for an additional cost of $31,000 and can then be sold for $116,000. Product T can be processed beyond the split-off point for an additional cost of $17,000 and can then be sold for $65,000. Which products should be processed beyond the split-off point? (Show all calculations) What is a joint product cost? Explain in your own words.Benjamin Signal Company produces products R, J, C from a joint process. Each product may be sold at the split off point or be processed further. Joint production costs of $92,000 are allocated to the products based on the relative number of units produced. Data for the current year operations follow: Product Units Allocated Joint Sales Value at Produced Production Spit off Cost $ 32,000 $ 40,000 $ 20,000 $ 76,000 $ 71,000 $ 48,000 R 8,000 10,000 5,000 Product R can be processed beyond the split off point for an additional cost of $26,000 and can then be sold for $105,000. Product J can be processed beyond the split off point for an additional $38,000 and then sold for $117,000. Product C can be processed beyond the split off point for an additional $12,000 and then sold for $57,000. Required: Which products should be processed beyond the split off point? Show your calculations.
- Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 6,100,000 $ 10,100,000 $ 9,200,000 Average operating assets $ 1,525,000 $ 5,050,000 $ 2,300,000 Net operating income $ 317,200 $ 929,200 $ 225,400 Minimum required rate of return 15.00 % 18.40 % 12.00 % Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 17% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?Venezuela Oil Inc. transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by-product base oil. The base oil is sold at the split-off point for $1,000,000 of annual revenue, and the joint processing costs to get the crude oil to split-off are $10,000,000. Additional information includes: Required: Determine the allocation of joint costs using the net realizable value method, rounding the sales value percentages to the nearest tenth of a percent. (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product revenue.)Division X supplies partially completed units of product to division Y. The divisions negotiated a price of $30 plus 20% per unit. Assuming Division X completed and transferred 5,000 units to division Ythe total transfer price this transaction is :
- ats Assume a company has three products-A, B, and C-that emerge from a joint process. The joint processing costs that are incurred up to the split-off point equal $1,200,000. The selling prices and outputs for each product at the split-off point are as follows: Product A B С Selling Price $33 per pound $29 per pound $24 per pound Product A B C Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: Output 14,000 pounds 18,000 pounds 19,000 pounds Additional Processing Costs $65,000 $72,000 $88,000 Selling Price $37 per pound $34 per pound $30 per pound The company is trying to decide whether to retain or discontinue the entire joint manufacturing process. What is the financial advantage (disadvantage) of continuing to operate the entire joint manufacturing process?Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 15,400,000 $ 28,320,000 $ 25,400,000 Average operating assets $ 3,080,000 $ 7,080,000 $ 5,080,000 Net operating income $ 693,000 $ 396,480 $ 736,600 Minimum required rate of return 7.00 % 7.50 % 14.50 % Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?Ibsen Company makes two products from a common input. Joint processing costs up to the split-off point total $45,500 a year. The company allocates these costs to the joint products on the basis of their total sales values at the split-off point. Each product may be sold at the split-off point or processed further. Data concerning these products appear below: Product X Product Y Total Allocated joint processing costs $27,300 $ 18,200 $ 45,500 Sales value at split-off point $ 30,000 $20,000 $50,000 Costs of further processing $ 24,200 $ 18,500 $ 42,700 Sales value after further processing $ 47,800 $58,300 $ 106,100 Required: a. What is financial advantage (disadvantage) of processing Product X beyond the split-off point? (Negative amount should be indicated by a minus sign.) b. What is financial advantage (disadvantage) of processing Product Y beyond the split-off point? c. What is the minimum amount the company should accept for Product X if it is to be sold at the split-off point? d.…
- Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division New South Queensland Wales $ 2,016,000 630,000 80,640 197,000 Sales $ Average operating assets Net operating income Property, plant, and equipment (net) 864,000 $ 540,000 $ 60,480 247,000 $ $ $ Required: 1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job?Your Corporation produces products P, Q, and R from a joint production process. Each product may be sold at the split-off point or processed further. Joint production costs of $80,000 per year are allocated to the products based on the relative number of units produced. Which products should be processed further? P Q R Units produced 3,000 6,000 1,000 Selling price at split off $37,500 $46,500 $15,500 Cost to process further $10,000 $30,000 $5,000 Selling price after processing $50,000 $65,000 $25,000 a. P, Q and R b. P and Q c. Just P d. P and R e. Just QSelected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South Wales Sales $ 1,800,000 $ 2,499,000 Average operating assets $ 600,000 $ 510,000 Net operating income $ 180,000 $ 174,930 Property, plant, and equipment (net) $ 260,000 $ 210,000 Required: 1. Compute each division's margin, turnover, and return on investment (ROI). 2. Which divisional manager seems to be doing the better job?