The Foundational 15 (Algo) [LO7-1, LO7-2, LO7-3, LO7-4, LO7-5] [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $70 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 53,000 units and sold 48,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense Foundational 7-8 (Algo) The company sold 36,000 units in the East region and 12,000 units in the West region. It determined that $270,000 of its fixed selling and administrative expense is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. a. What is the company's break-even point in unit sales? Break even point Break even point units units 9. If the sales volumes in the East and West regions had been reversed, what would be the company's overall break-even point in unit sales? $ 1,060,000 $ 557,000 $ 21 $ 10 $2 $4 10. What would have been the company's variable costing net operating income (loss) if it had produced and sold 48,000 units? You do not need to perform any calculations to answer this question. 11. What would have been the company's absorption costing net operating income (loss) if it had produced and sold 48,000 units? You do not need to perform any calculations to answer this question. Income Statement 13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions. Total Company East selling West 14. Diego is considering eliminating the West region because an internally generated report suggests the region's total gross margin in the first year of operations was $66.000 less than its traceable f I diens Jatet

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Chapter1: Financial Statements And Business Decisions
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The Foundational 15 (Algo) [LO7-1, LO7-2, LO7-3, LO7-4, LO7-5]
[The following information applies to the questions displayed below.]
Diego Company manufactures one product that is sold for $70 per unit in two geographic regions-the East and West
regions. The following information pertains to the company's first year of operations in which it produced 53,000 units
and sold 48,000 units.
Variable costs per unit:
Manufacturing:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expense
Foundational 7-8 (Algo)
a. What is the company's break-even point in unit sales?
The company sold 36,000 units in the East region and 12,000 units in the West region. It determined that $270,000 of
its fixed selling and administrative expense is traceable to the West region, $220,000 is traceable to the East region,
and the remaining $67,000 is a common fixed expense. The company will continue to incur the total amount of its fixed
manufacturing overhead costs as long as it continues to produce any amount of its only product.
Break even point
Break even point
Profit will
9. If the sales volumes in the East and West regions had been reversed, what would be the company's overall break-even point in unit
sales?
units
units
10. What would have been the company's variable costing net operating income (loss) if it had produced and sold 48,000 units? You do
not need to perform any calculations to answer this question.
$ 21
$ 10
$2
$4
$ 1,060,000
$ 557,000
11. What would have been the company's absorption costing net operating income (loss) if it had produced and sold 48,000 units? You
do not need to perform any calculations to answer this question.
Profit will
13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West
regions.
Income Statement
Total
Company
East
14. Diego is considering eliminating the West region because an internally generated report suggests the region's total gross margin in
the first year of operations was $66,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops
the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability
and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?
West
15. Assume the West region invests $43,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else
remains constant, what would be the profit impact of pursuing the advertising campaign?
Transcribed Image Text:nces The Foundational 15 (Algo) [LO7-1, LO7-2, LO7-3, LO7-4, LO7-5] [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $70 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 53,000 units and sold 48,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense Foundational 7-8 (Algo) a. What is the company's break-even point in unit sales? The company sold 36,000 units in the East region and 12,000 units in the West region. It determined that $270,000 of its fixed selling and administrative expense is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. Break even point Break even point Profit will 9. If the sales volumes in the East and West regions had been reversed, what would be the company's overall break-even point in unit sales? units units 10. What would have been the company's variable costing net operating income (loss) if it had produced and sold 48,000 units? You do not need to perform any calculations to answer this question. $ 21 $ 10 $2 $4 $ 1,060,000 $ 557,000 11. What would have been the company's absorption costing net operating income (loss) if it had produced and sold 48,000 units? You do not need to perform any calculations to answer this question. Profit will 13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions. Income Statement Total Company East 14. Diego is considering eliminating the West region because an internally generated report suggests the region's total gross margin in the first year of operations was $66,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? West 15. Assume the West region invests $43,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?
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