Homework Help is Here – Start Your Trial Now!
Business
Accounting
Fixed costs (32,000) (12,400) (24,780) (69,180) Total cost of goods sold $(80,000) $(31,000) $(61,930) $(172,930) ross profit $130,000 $124,000 $125,070 $379,070 perating expenses: Variable expenses $(5,000) $(7,750) $(53,090) $(65,840) Fixed expenses (89,000) (77,000) (106,200) (272,200) Total operating expenses $(94,000) $(84,750) $(159,290) $(338,040) Operating income (loss) $36,000 $39,250 $(34,220) $41,030 omplete the following table using the data in the preceding income statement to compare the effects of dropping the rug yarn line of products F required, use a minus sign to indicate a loss. Differential Analysis Continue Rug Yarn (Alternative 1) or Discontinue Rug Yarn (Alternative 2) December 31, 20Y8 Continue Rug Yarn (Alternative 1) Discontinue Rug Yarn (Alternative 2) Differential Effects (Alternative 2) Revenues Costs: Variable Fixed Profit (loss)

Fixed costs (32,000) (12,400) (24,780) (69,180) Total cost of goods sold $(80,000) $(31,000) $(61,930) $(172,930) ross profit $130,000 $124,000 $125,070 $379,070 perating expenses: Variable expenses $(5,000) $(7,750) $(53,090) $(65,840) Fixed expenses (89,000) (77,000) (106,200) (272,200) Total operating expenses $(94,000) $(84,750) $(159,290) $(338,040) Operating income (loss) $36,000 $39,250 $(34,220) $41,030 omplete the following table using the data in the preceding income statement to compare the effects of dropping the rug yarn line of products F required, use a minus sign to indicate a loss. Differential Analysis Continue Rug Yarn (Alternative 1) or Discontinue Rug Yarn (Alternative 2) December 31, 20Y8 Continue Rug Yarn (Alternative 1) Discontinue Rug Yarn (Alternative 2) Differential Effects (Alternative 2) Revenues Costs: Variable Fixed Profit (loss)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

For the past year, WOOLCORP has experimented with his third product, extra thick rug yarn. The company wishes to consider whether to continue or discontinue manufacturing and selling this product. You decide to prepare a differential analysis of the income related to all three products. To begin your analysis you review the following condensed income statement. Complete the following table using the data in the preceding income statement to compare the effects of dropping the rug yarn line of products.

### WoolCorp Production Analysis WoolCorp purchases sheep’s wool from farmers. The company began operations in January of this year and is currently making decisions on product offerings, pricing, and vendors. A production manager has been hired to evaluate the method of assigning overhead to products. #### Product Lines WoolCorp manufactures three products: 1. Raw wool for stuffing or insulation. 2. Wool yarn for use in the textile industry. 3. Extra-thick yarn for use in rugs. Upper management is seeking recommendations on whether to continue or discontinue their existing and proposed product lines. #### Continue/Discontinue Analysis Over the past year, WoolCorp experimented with producing extra-thick rug yarn. Management is considering its continuation based on financial performance. A differential analysis is required to evaluate the income related to all three products. As part of this process, a condensed income statement for the year ending December 31, 20Y8, has been prepared. #### WoolCorp Condensed Income Statement **For the Year Ended December 31, 20Y8** | Product | Raw Wool | Wool Yarn | Rug Yarn | Total Company | |-----------------|----------|-----------|----------|---------------| | **Sales** | $210,000 | $155,000 | $187,000 | $552,000 | | **Costs of Goods Sold:** | | | | | | Variable Costs | $(48,000)| $(18,600) | $(37,150)| $(103,750) | | Fixed Costs | $(32,000)| $(12,400) | $(24,780)| $(69,180) | | **Total Cost of Goods Sold** | $(80,000)| $(31,000) | $(61,930)| $(172,930) | | **Gross Profit**| $130,000 | $124,000 | $125,070 | $379,070 | The income statement outlines the sales, variable costs, and fixed costs for each product, providing insights into the gross profit earned from each product line. Management is advised to use this data in their decision-making process regarding the continuation of the rug yarn product.
Transcribed Image Text:### WoolCorp Production Analysis WoolCorp purchases sheep’s wool from farmers. The company began operations in January of this year and is currently making decisions on product offerings, pricing, and vendors. A production manager has been hired to evaluate the method of assigning overhead to products. #### Product Lines WoolCorp manufactures three products: 1. Raw wool for stuffing or insulation. 2. Wool yarn for use in the textile industry. 3. Extra-thick yarn for use in rugs. Upper management is seeking recommendations on whether to continue or discontinue their existing and proposed product lines. #### Continue/Discontinue Analysis Over the past year, WoolCorp experimented with producing extra-thick rug yarn. Management is considering its continuation based on financial performance. A differential analysis is required to evaluate the income related to all three products. As part of this process, a condensed income statement for the year ending December 31, 20Y8, has been prepared. #### WoolCorp Condensed Income Statement **For the Year Ended December 31, 20Y8** | Product | Raw Wool | Wool Yarn | Rug Yarn | Total Company | |-----------------|----------|-----------|----------|---------------| | **Sales** | $210,000 | $155,000 | $187,000 | $552,000 | | **Costs of Goods Sold:** | | | | | | Variable Costs | $(48,000)| $(18,600) | $(37,150)| $(103,750) | | Fixed Costs | $(32,000)| $(12,400) | $(24,780)| $(69,180) | | **Total Cost of Goods Sold** | $(80,000)| $(31,000) | $(61,930)| $(172,930) | | **Gross Profit**| $130,000 | $124,000 | $125,070 | $379,070 | The income statement outlines the sales, variable costs, and fixed costs for each product, providing insights into the gross profit earned from each product line. Management is advised to use this data in their decision-making process regarding the continuation of the rug yarn product.
**Title: Analyzing Cost and Profitability for Rug Yarn Product Line** ### Income Statement Overview The table below summarizes the financial data for three different product lines as well as the total company: - **Product Lines**: - A - B - C - **Metrics Provided**: - Fixed Costs - Total Cost of Goods Sold - Gross Profit - Operating Expenses (Variable and Fixed) - Total Operating Expenses - Operating Income (Loss) #### Product Line Financial Summary 1. **Line A**: - Fixed Costs: $(32,000) - Total Cost of Goods Sold: $(80,000) - Gross Profit: $130,000 - Variable Expenses: $(5,000) - Fixed Expenses: $(89,000) - Total Operating Expenses: $(94,000) - Operating Income: $36,000 2. **Line B**: - Fixed Costs: $(12,400) - Total Cost of Goods Sold: $(31,000) - Gross Profit: $124,000 - Variable Expenses: $(7,750) - Fixed Expenses: $(77,000) - Total Operating Expenses: $(84,750) - Operating Income: $39,250 3. **Line C**: - Fixed Costs: $(24,780) - Total Cost of Goods Sold: $(61,930) - Gross Profit: $125,070 - Variable Expenses: $(53,090) - Fixed Expenses: $(106,200) - Total Operating Expenses: $(159,290) - Operating Income: $(34,220) 4. **Total for Company**: - Fixed Costs: $(69,180) - Total Cost of Goods Sold: $(172,930) - Gross Profit: $379,070 - Variable Expenses: $(65,840) - Fixed Expenses: $(272,200) - Total Operating Expenses: $(338,040) - Operating Income: $41,030 ### Differential Analysis: Decision Making for Rug Yarn Line The following table is meant for analyzing the impact of either continuing or discontinuing the Rug Yarn product line using data as of December 31, 2018. #### Analysis Comparison Table - **Metrics**: - Revenues - Costs (Variable and
Transcribed Image Text:**Title: Analyzing Cost and Profitability for Rug Yarn Product Line** ### Income Statement Overview The table below summarizes the financial data for three different product lines as well as the total company: - **Product Lines**: - A - B - C - **Metrics Provided**: - Fixed Costs - Total Cost of Goods Sold - Gross Profit - Operating Expenses (Variable and Fixed) - Total Operating Expenses - Operating Income (Loss) #### Product Line Financial Summary 1. **Line A**: - Fixed Costs: $(32,000) - Total Cost of Goods Sold: $(80,000) - Gross Profit: $130,000 - Variable Expenses: $(5,000) - Fixed Expenses: $(89,000) - Total Operating Expenses: $(94,000) - Operating Income: $36,000 2. **Line B**: - Fixed Costs: $(12,400) - Total Cost of Goods Sold: $(31,000) - Gross Profit: $124,000 - Variable Expenses: $(7,750) - Fixed Expenses: $(77,000) - Total Operating Expenses: $(84,750) - Operating Income: $39,250 3. **Line C**: - Fixed Costs: $(24,780) - Total Cost of Goods Sold: $(61,930) - Gross Profit: $125,070 - Variable Expenses: $(53,090) - Fixed Expenses: $(106,200) - Total Operating Expenses: $(159,290) - Operating Income: $(34,220) 4. **Total for Company**: - Fixed Costs: $(69,180) - Total Cost of Goods Sold: $(172,930) - Gross Profit: $379,070 - Variable Expenses: $(65,840) - Fixed Expenses: $(272,200) - Total Operating Expenses: $(338,040) - Operating Income: $41,030 ### Differential Analysis: Decision Making for Rug Yarn Line The following table is meant for analyzing the impact of either continuing or discontinuing the Rug Yarn product line using data as of December 31, 2018. #### Analysis Comparison Table - **Metrics**: - Revenues - Costs (Variable and
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Strategic business units
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS