Managerial Accounting
Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
bartleby

Videos

Question
Book Icon
Chapter 10, Problem 6PSA

1.

To determine

To prepare: Three column report for total expenses, eliminated expenses and continuing expenses.

1.

Expert Solution
Check Mark

Explanation of Solution

Given below is the three column report for analysis of expenses under elimination of department 200 of E Company:

E Company
Particulars Total expenses ($) Eliminated expenses ($) Continuing expenses ($)
Cost of goods sold 469,000 207,000 262,000
Direct expenses
Advertising 29,000 12,000 17,000
Store supplies used 7,800 3,800 4,000
Depreciation − Store equipment 8,300 8,300
Allocated expenses
Sales salaries 104,000 52,000 52,000
Rent expenses 14,160 14,160
Bad debts expenses 18,000 8,100 9,900
Office salary 31,200 - 31,200
Insurance expenses 3,100 770 2,330
Miscellaneous office expenses 4,000 400 3,600
Total expenses 688,560 284,070 404,490
Table (1)

Hence, total expenses are $688,560, eliminated expenses are $284,070 and continuing expenses are $404,490.

2.

To determine

To prepare: Forecasted annual income statement under plan to eliminate department 200.

2.

Expert Solution
Check Mark

Explanation of Solution

Given below is the forecasted annual income statement of E Company:

Annual income statement
Particulars Amount ($)
Sales 436,000
Less: Cost of goods sold 262,000
Gross profit ( A ) 174,000
Operating expenses
Advertising 17,000
Store supplies 4,000
Depreciation-Store equipment 8,300
Total direct expenses ( B ) 29,300
Allocated expenses
Sales salaries 67,600
Rent expenses 14,160
Bad debts expenses 9,900
Office salary 15,600
Insurance expenses 2,330
Miscellaneous office expense 3,600
Total allocated expenses ( C ) 113,190
Total expenses ( D )=( B ) +( C )  142,490
Net income (loss) ( A )( D ) 31,510
Table (2)

Hence, forecasted net income is $31,510.

3.

To determine

To prepare: Reconciliation statement of combined income with forecasted income.

3.

Expert Solution
Check Mark

Explanation of Solution

Given below is the reconciliation statement of combined income with forecasted income of E Company:

Reconciliation statement
Particulars Amount ($)
Combined net income 37,440
Savings of total expenses 284,070
Loss of revenue (sales) (290,000)
Forecasted income 31,510
Table (3)

Hence, forecasted income reconcile with combined income at $31,510.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 10 Solutions

Managerial Accounting

Knowledge Booster
Background pattern image
Accounting
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.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Introduction to Divisional performance measurement - ACCA Performance Management (PM); Author: OpenTuition;https://www.youtube.com/watch?v=pk8Mzoqr4VA;License: Standard Youtube License