Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 11, Problem 15E
To determine
Decision on the dropping or retaining the segment to be taken based on relevant cost describes the factors to be considered while deciding whether the segment shall be dropped or retained. The same shall be taken on the basis of computation of net income generated after deducting the relevant cost relating to the segment.
The decision on retaining or dropping the segment shall be determined.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Dropping or Retaining a Segment
Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows:
Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company’s total general factory overhead or total Purchasing Department expenses.
Required:
What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?
Bright Times Co. is considering closing the table lamp segment. Current revenue was $78,000, with variable costs of $50,000, and fixed costs of $40,000. What is differential income or loss from the table lamp segment and should it be discontinued?
The management of Woznick Corporation has been concerned for some time with
the financial performance of its product V860 and has considered discontinuing it
on several occasions. Data from the company's accounting system for this product
for last year appear below:
Sales
Variable expenses
Fixed manufacturing expenses
Fixed selling and administrative expenses
In the company's accounting system all fixed expenses of the company are fully
allocated to products. Further investigation has revealed that $30,000 of the fixed
manufacturing expenses and $13,000 of the fixed selling and administrative
expenses are avoidable if product V860 is discontinued.
What would be the financial advantage (disadvantage) from dropping product
V860?
Multiple Choice
($35,000)
($5,000)
$35,000
$5,000
$ 150,000
$ 72,000
$50,000
$ 33,000
FFF
Next
Chapter 11 Solutions
Introduction To Managerial Accounting
Ch. 11 - What is a relevant cost?Ch. 11 - Define the following terms: incremental cost,...Ch. 11 - Are variable costs always relevant costs? Explain.Ch. 11 - Prob. 4QCh. 11 - “Variable costs and differential costs mean the...Ch. 11 - Prob. 6QCh. 11 - Prentice Company is considering dropping one of...Ch. 11 - Prob. 8QCh. 11 - What is the danger in allocating common fixed...Ch. 11 - Prob. 10Q
Ch. 11 - Give at least four examples of possible...Ch. 11 - Prob. 12QCh. 11 - Define the following terms: joint products, joint...Ch. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - The Excel worksheet form that appears below is to...Ch. 11 - The Excel worksheet form that appears below is to...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 9F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Identifying Relevant Costs Syahn, AB, is a Swedish...Ch. 11 - Prob. 2ECh. 11 - Make or Buy Decision Troy Engines, Ltd,...Ch. 11 - Special Order Decision Imperial Jewelers...Ch. 11 - Volume Trade-off Decisions Outdoor Luggage, Inc.,...Ch. 11 - Prob. 6ECh. 11 - Sell or Process Further Decisions Dorsey Company...Ch. 11 - Volume Trade-Off Decisions Barlow Company...Ch. 11 - Special Order Decision Delta Company produces a...Ch. 11 - Make or Buy Decision Futura Company purchases the...Ch. 11 - Make or Buy Decision Han Products manufactures...Ch. 11 - Volume Trade-Off Decisions Benoit Company produces...Ch. 11 - Prob. 13ECh. 11 - Identification of Relevant Costs Kristen Lu...Ch. 11 - Prob. 15ECh. 11 - Identification of Relevant Costs Bill has just...Ch. 11 - Prob. 17ECh. 11 - Prob. 18PCh. 11 - Dropping or Retaining a Segment Jackson Count...Ch. 11 - Sell or Process Further Decision (Prepared from a...Ch. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Make or Buy Decision Silven Industries, which...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Close or Retain a Store Superior Markets. Inc.,...Ch. 11 - Sell or Process Further Decisions Come-Clean...Ch. 11 - Make or Buy Decisions “In my opinion, we ought to...
Knowledge Booster
Similar questions
- The table Top Model corp. produces three products, Tic, Tac, Toc. The owner desires to reduce production load to only one product lien due to the prolonged absence of the production manager. Depreciation expense amounts to P600,000 annually. Other fixed operating expenses amount to P660,000 per year. Which product must be retained and what is the opportunity cost of selecting such product line?arrow_forwardLittle Cory Corporation is considering dropping product G41O. Data from the company's accounting system appear below: All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.Required:a. According to the company's accounting system, what is the net operating income earned by product G41O? b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? There is not a word length requirement for this question; however, you must show your work. sales 450,000 variable expenses 185,000 fixesd manufacturing expenses 149,000 fixed selling and administered expenses 113,000arrow_forwardRequired information [The following information applies to the questions displayed below.] Praveen Company manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding that has not been as profitable as planned. Because Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year's plans call for a $310 selling price per unit. Its fixed costs for the year are expected to be $421,600. Variable costs for the year are expected to be $186 per unit. 2. Prepare a contribution margin income statement for Product XT at the break-even point. PRAVEEN COMPANY Contribution Margin Income Statement (at Break-Even) - Product XT Units $ per unit Total Less: Less: Sales Variable cost Contribution margin Fixed costs Incomearrow_forward
- Stretch Inc. sells both yoga pants and yoga mats. Manager for Stretch are concerned about their operating losses. They are considering dropping their yoga mat product line. Operating income by product line and in total is shown below. 1) Prepare a new operating income analysis assuming Stretch will only sell yoga pants. 2) Then explain why Stretch should drop or not drop the yoga mat product line based on your analysis. All fixed costs are allocated fixed costs. Income Statement for year ended December 31, 2020 Sales Revenue Total $425,000 Yoga Pants $299,000 Yoga Mats $126,000 Variable Costs $221,000 Yoga Pants $136,000 Yoga Mats $ 85,000 Contribution Margin $204,000 Yoga Pants 163,000 Yoga Mats $41,000 Fixed Costs: Fixed Manufacturing Total $127,000 Yoga Pants $62,000 Yoga Mats $65,000 Selling & Administrative Total $64,000 Yoga Pants $46,000 Yoga Mats $18,000 Operating Income Total$13,000 Yoga Pants $55,000 Yoga Mats (42,000)arrow_forwardGranfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $46,500 as shown below. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) If the backpack division is dropped, all $484,000 of its variable costs are avoidable, and $216,200 of its fixed costs are avoidable. The impact on Granfield's income from eliminating this business segment would be: Multiple Choice $494,000 decrease $216,200 increase $277,800 decrease $ 978,000 484,000 494,000 540,500 $ (46,500) $494,000 increasearrow_forwardDropping or Retaining a Segment The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.arrow_forward
- Head Bucket, Inc. has two product lines—batting helmets and football helmets. The income statement data for the most recent year is as follows in the chart. Assuming the football helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the football helmet line is used to double the production of batting helmets, operating income will be ________.arrow_forwardThe Draper Company is considering dropping its Dream bug toy due to continuing losses. Revenue and cost data on the toy for the past year follow: Sales of 15,000 units P 150,000 Variable expenses 120,000 Contribution margin 30,000 Fixed expenses 40,000 Net operating loss (P 10,000) If the toy were discontinued, then Draper could avoid P8,000 per year in fixed costs. 1. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be: A) P 30,000 decrease B) P 10,000 increase C) P 22,000 decrease D) P 18,000 increase 2. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent to discontinuing Doombugs or continuing the production and sale of Doombugs? A) 20,000 B) 18,000 C) 6,000 D) 4,000…arrow_forwardMaking dropping a product or segment decisions Edna Fashions operates three departments: Men’s, Women’s and Accessories Depart mental operating income data for the third quarter of 2018 are as follows: Assume that the fixed costs assigned to each department include only direct fixed costs of the department: • Salary of the department’s manager • Cost of advertising directly related to that department If Edna Fashions drops a department, it will not incur these fixed costs Under these circumstances, should Edna Fashions drop any of the departments? Give your reasoningarrow_forward
- The Draper Company is considering dropping its Dream bug toy due to continuing losses. Revenue and cost data on the toy for the past year follow: Sales of 15,000 units P 150,000 Variable expenses 120,000 Contribution margin 30,000 Fixed expenses 40,000 Net operating loss (P 10,000) If the toy were discontinued, then Draper could avoid P8,000 per year in fixed costs. 1. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be: 2. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent to discontinuing Doombugs or continuing the production and sale of Doombugs? 3. Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a P16,000 increase in the contribution margin received from these…arrow_forwardCornell Enterprises currently produces several products. Model L78 is showing a net operating loss as indicated by the following condensed income statement prepared for the year ended December 31. You have been hired by Cornell Enterprises to help analyze the decision as to whether to eliminate Model L78. Upon investigation, you discover that if Model L78 is eliminated, $20,000 of the fixed costs shown on the above condensed income statement can be eliminated. The rest of the fixed costs allocated to Model L78 are common fixed costs that will be allocated to the remaining two products produced by Cornell Enterprises. Determine if Cornell Enterprises should discontinue Model L78.arrow_forwardValdez Company is considering eliminating its kitchen division, which reported an operating loss of $59,000 for the past year as shown below. Segment Income (Loss) Sales. Variable costs. Contribution margin Fixed costs Income (loss) If the kitchen division is dropped, all $850,000 of its variable costs are avoidable, and $209,400 of its fixed costs are avoidable. The impact on Valdez's income from eliminating this business segment would be: Multiple Choice $80,600 decrease $290,000 increase $300,600 decrease $1,140,000 850,000 290,000 349,000 $ (59,000) $80,600 increasearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,