Problem: Module 6 Textbook Problem 7Learning Objective: 6-4 Make appropriate segment elimination decisionsPerez Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment Awere eliminated.SegmentSalesCost of goods soldSales commissionsContribution marginGeneral fixed operating expenses (allocation of president's salary)Advertising expense (specific to individual divisions)Net income (loss)PEREZ COMPANYIncome Statements for Year 2Complete this question by entering your answers in the tabs below.Required A Required BPEREZ COMPANYComparative Income Statements for the Year 2DecisionSalesCost of goods soldSales commissionsContribution marginGeneral fixed operating expensesAdvertising expenseNet IncomeKeep Seg. A Eliminate Seg. AA$ 166,000(128,000)(21,000)Requireda. Prepare a schedule of relevant sales and costs for Segment A.b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2)the elimination of Segment A.< Required AB$241,000Required B >(81,000)(24,000)Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment Aand (2) the elimination of Segment A.с$249,00017,000(37,000)(5,000)(16,000)$ (25,000) $ 69,000(84,000)(27,000)136,000138,000(51,000) (37,000)0$101,000

Segmented Income Statement:A segmented income statement provides a more thorough analysis of…

Problem: Module 6 Textbook Problem 7 Learning Objective: 6-4 Make appropriate segment elimination decisions Perez Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions PEREZ COMPANY Income Statements for Year 2 $ 166,000 (128,000) (21,000) B $241,000 $249,000 (81,000) (84,000) (24,000) (27,000)

Problem: Module 6 Textbook Problem 7 Learning Objective: 6-4 Make appropriate segment elimination decisions Perez Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions PEREZ COMPANY Income Statements for Year 2 $ 166,000 (128,000) (21,000) B $241,000 $249,000 (81,000) (84,000) (24,000) (27,000)

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 44E

See similar textbooks

Similar questions

Homework 1 In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses Required 1 Required 2A Required 28. Complete this question by entering your answers in the tabs below. Net operating income will East $ 392,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $28,000 will increase that division's sales by 16%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising? increase 52% by $ 299,000
Stuart Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. Segment Sales Cost of goods sold Sales commissions Contribution margin. General fixed operating expenses (allocation of president's salary) Advertising expense (specific to individual divisions) Net income (loss) Complete this question by entering your answers in the tabs below. Required A Required B STUART COMPANY Income Statements for Year 2 Prepare a schedule of relevant sales and costs for Segment A. Relevant Rev. and Cost items for Segment A Sales Cost of goods sold Sales commissions Advertising expense Effect on income Required a. Prepare a schedule of relevant sales and costs for Segment A. b. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A. $ $ 163,000 (128,000) (17,000) 0 B $242,000 $256,000 (78,000) (28,000) (86,000)…
Cost of quality and value-added/non-value-added reports for a service company A. Using the information in Exercise 17, identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. B. Prepare a cost of quality report. Assume that sales are 3,000,000. (Round percentages to one decimal place.) C. Prepare a value-added/non-value-added analysis. D. Interpret the information in (B) and (C).
MASTERY PROBLEM Bobs Acme Supermarket has been in operation for many years, offering high-quality groceries, produce, and meat at reasonable prices. Accounting records are maintained on a departmental basis with assignment of direct expenses and allocation of indirect expenses through the use of various procedures. Selected operating information for the year ended December 31, 20--, is as follows: REQUIRED 1. (a) Prepare an income statement showing departmental operating income. (b) Compute the gross profit percentage and operating income percentage for each department (round to the nearest tenth of a percent). 2. (a) Prepare an income statement showing departmental and total direct operating margins. (b) Compute the departmental direct operating margin percentage for each department (round to the nearest tenth of a percent). 3. Should Bob be concerned about the profitability of the three departments? Should any of the departments be discontinued?
CVP Application Problem 4: Segmented Income Statements — Costs of Activities Hunter, Inc., manufactures and distributes three principal product lines: sporting goods, housewares, and hardware. The company has suffered reduced profitability in the past few quarters, and the top managers have taken a number of actions to try to improve the situation. The most recent quarterly income statement, segmented by product line, follows. Indirect, common fixed costs are allocated to the lines based on relative sales or labor content. Hunter, Inc.Income Statement, Second Quarter(in thousands of dollars) Total Sporting Goods Housewares Hardware Sales $3,337.0 $650.0 $921.0 $1,766.0 Cost of Sales $1,928.8 $357.3 $545.7 $1,025.8 Gross Margin $1,408.2 $292.7 $375.3 $ 740.2 Operating Expenses: Selling Expenses $ 787.6 $157.1 $225.9 $ 404.6 Administrative Expenses $514.6 $94.2 $135.6 $284.8 Total Operating Expenses $1,302.2 $251.3 $361.5 $ 689.4 Income Before Taxes $ 106.0…
PR 24-5A Divisional performance analysis and evaluation The vice president of operations of Pavone Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: OBJ. 4 Business Division Consumer Division Sales $2,500,000 1,320,000 $2,550,000 1,350,000 Cost of goods sold Operating expenses Invested assets 930,000 843,000 1,250,000 2,125,000 Instructions 1. Prepare condensed divisional income statements for the year ended December 31, 2016, assuming that there were no service department charges. 2. Using the DuPont formula for rate of return on investment, determine the profit mar- gin, investment turnover, and rate of return on investment for each division. 3. If management desires a minimum acceptable rate of return of 17%, determine the residual income for each division.
TB Problem 12-90 Midtown Retail operates a retail store... Midtown Retail operates a retail store in Kansas City, MO., and St. Louis, MO. The following information relates to the Kansas City facility: • The store sold 61,800 units at $34.00 each, after having purchased the units from various suppliers for $26.50. Kansas City salespeople are paid a 1% commission based on gross sales dollars. • Kansas City's sales manager oversees the placement of local advertising contracts, which totaled $70,000 for the year. Local property taxes amounted to $30,500. • The sales manager's $81,000 salarv is set by Kansas City's store manager. In contrast, the store manager's $150,000 salary is determined by Midtown's vice president. • Kansas City incurred $14,800 of other noncontrollable costs. • Nontraceable (common) corporate overhead totaled $84,000. ok nt ences Midtown's corporate headquarters is located in St. Louis, and the company uses responsibility accounting to evaluate performance. Required:…
Companywide and Segment Break-Even Analysis Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region? Why?
Segment Reporting The XYZ Company produces and sells two products: The Riffs and The Raffs. Below is revenue and cost information to facilitate the development of a basic segmented income statement. Product Riffs Raffs Sales Price per unit $8.00 6.00 Variable Cost per unit $3.20 3.00 Traceable Fixed Costs $62,000 $44,000 It is expected that the company will incur $21,000 of common fixed expenses and unit sales are expected to be 12,000 of Riffs and 18,000 of Raffs. Required: Construct a Contribution Format Income Statement segmented by product line and company total.
Keep-Or-Drop Decision, Alternatives, Relevant Costs Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Total Model 3 $631,000 Sales $260,000 $598,000 $1,489,000 Less variable costs of goods sold (89,000) (162,320) (336,400) (587,720) Less commissions (4,100) (38,000) (20,500) (62,600) Contribution margin $166,900 $397,680 $274,100 $838,680 Less common fixed expenses: Fixed factory overhead (405,000) Fixed selling and administrative (303,000) Operating income $130,680 While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional…
eBook Profit Center Responsibility Reporting Carry On Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 1,226,300 Revenues—Rail Division 1,443,700 Revenues—Truck Division 2,576,000 Operating Expenses—Air Division 777,100 Operating Expenses—Rail Division 859,200 Operating Expenses—Truck Division 1,557,800 Corporate Expenses—Shareholder Relations 186,500 Corporate Expenses—Customer Support 678,000 Corporate Expenses—Legal 222,300 General Corporate Officers' Salaries 411,900 The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer…
Corrections to service department charges Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared The service department charge rate for the service department costs was based on revenues. The following additional information is available a.Does the operating income for the two divisions accurately measure performance? b.Using service charge rates for service department charges, correct the divisional income statements.