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The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed.. Total cost of goods sold.. Gross profit... Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss)... Product Line Industrial Household Systems Systems Total $330,000 $360,000 $690,000 $ 35,000 250,000 $285,000 $ 45,000 62,000 39,000 $101,000 $(56,000) Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $44,000 $79,000 67,000 317,000 $111,000 $396,000 $249,000 $294,000 76,000 138,000 23,000 62,000 $99,000 $200,000 $150,000 $ 94,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that by cutting down on project expenses the company could save another $100,000 of fixed cost of goods sold from the product line (GREEN). 1. Using an incremental analysis approach (only relevant information) clearly calculate whether HVFP should discontinue the product line. Your analysis should first show the results without the GREEN savings and then show the results with the GREEN savings. 2. Prepare contribution margin income statements to show HVFP's total operating income under the three alternatives (a) with the industrial systems product line, (b) without the industrial systems product line, and (c) without the industrial systems product line and including the GREEN savings.

The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed.. Total cost of goods sold.. Gross profit... Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss)... Product Line Industrial Household Systems Systems Total $330,000 $360,000 $690,000 $ 35,000 250,000 $285,000 $ 45,000 62,000 39,000 $101,000 $(56,000) Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $44,000 $79,000 67,000 317,000 $111,000 $396,000 $249,000 $294,000 76,000 138,000 23,000 62,000 $99,000 $200,000 $150,000 $ 94,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that by cutting down on project expenses the company could save another $100,000 of fixed cost of goods sold from the product line (GREEN). 1. Using an incremental analysis approach (only relevant information) clearly calculate whether HVFP should discontinue the product line. Your analysis should first show the results without the GREEN savings and then show the results with the GREEN savings. 2. Prepare contribution margin income statements to show HVFP's total operating income under the three alternatives (a) with the industrial systems product line, (b) without the industrial systems product line, and (c) without the industrial systems product line and including the GREEN savings.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed... Total cost of goods sold. Gross profit.. Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss).... Product Line Industrial Systems $330,000 Household Systems Total $360,000 $690,000 $ 35,000 $44,000 $79,000 250,000 67,000 317,000 $285,000 $ 45,000 Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $111,000 $396,000 $249,000 $294,000 62,000 39,000 $101,000 $99,000 $200,000 $ (56,000) $150,000 $94,000 76,000 138,000 23,000 62,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that by cutting down on project expenses the company could save another $100,000 of fixed cost of goods sold from the product line (GREEN). 1. Using an incremental analysis approach (only relevant information) clearly calculate whether HVFP should discontinue the product line. Your analysis should first show the results without the GREEN savings and then show the results with the GREEN savings. 2. Prepare contribution margin income statements to show HVFP's total operating income under the three alternatives (a) with the industrial systems product line, (b) without the industrial systems product line, and (c) without the industrial systems product line and including the GREEN savings.
Transcribed Image Text:The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed... Total cost of goods sold. Gross profit.. Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss).... Product Line Industrial Systems $330,000 Household Systems Total $360,000 $690,000 $ 35,000 $44,000 $79,000 250,000 67,000 317,000 $285,000 $ 45,000 Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $111,000 $396,000 $249,000 $294,000 62,000 39,000 $101,000 $99,000 $200,000 $ (56,000) $150,000 $94,000 76,000 138,000 23,000 62,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that by cutting down on project expenses the company could save another $100,000 of fixed cost of goods sold from the product line (GREEN). 1. Using an incremental analysis approach (only relevant information) clearly calculate whether HVFP should discontinue the product line. Your analysis should first show the results without the GREEN savings and then show the results with the GREEN savings. 2. Prepare contribution margin income statements to show HVFP's total operating income under the three alternatives (a) with the industrial systems product line, (b) without the industrial systems product line, and (c) without the industrial systems product line and including the GREEN savings.
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