Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 12, Problem 53C
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company’s major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim’s board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement.
Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings.
- 1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic areas on the basis of the ratio of the variable costs expended to total variable costs.
- 2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be the ratio of units produced per product line (or per geographical area) to the total number of units produced.
- 3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation.
- 4. The division managers were able to provide reliable sales percentages for their product lines by geographical area.
Murphy prepared the following product-line income statement based on the data presented above.
Required:
- 1. Prepare a segmented income statement for Pacific Rim Industries based on the company’s geographical areas. The statement should show the operating income for each segment.
- 2. As a result of the information disclosed by both segmented income statements (by product line and by geographic area), recommend areas where Pacific Rim Industries should focus its attention in order to improve corporate profitability.
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Chapter 12 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 12 - Why is goal congruence important to an...Ch. 12 - Define and give examples of the following terms:...Ch. 12 - Prob. 3RQCh. 12 - Explain the relationship between performance...Ch. 12 - Prob. 5RQCh. 12 - What is the key feature of activity-based...Ch. 12 - Prob. 7RQCh. 12 - Define and give examples of the following terms:...Ch. 12 - Give an example of a common resource in an...Ch. 12 - Explain how and why cost allocation might be used...
Ch. 12 - Define the term cost allocation base. What would...Ch. 12 - Referring to Exhibit 125, why are marketing costs...Ch. 12 - Prob. 13RQCh. 12 - Why do some managers and accountants choose not to...Ch. 12 - Why is it important in responsibility accounting...Ch. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 21RQCh. 12 - Prob. 22RQCh. 12 - Prob. 23RQCh. 12 - Define the term manufacturing cycle efficiency.Ch. 12 - Prob. 25RQCh. 12 - What is meant by aggregate productivity, and what...Ch. 12 - For each of the following organizational subunits,...Ch. 12 - Prob. 28ECh. 12 - Prob. 29ECh. 12 - The following data pertain to the Waikiki Sands...Ch. 12 - Lackawanna Community College has three divisions:...Ch. 12 - Countywide Cable Services, Inc. is organized with...Ch. 12 - Prob. 36ECh. 12 - Prob. 37ECh. 12 - Prob. 38ECh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Rocky Mountain General Hospital serves three...Ch. 12 - Refer to the organization chart for Rocky Mountain...Ch. 12 - Prob. 44PCh. 12 - Buckeye Department Stores, Inc. operates a chain...Ch. 12 - Building Services, Co. (BSC) was started a number...Ch. 12 - Warriner Equipment Company, which is located in...Ch. 12 - Prob. 49PCh. 12 - MedTech, Inc. manufactures diagnostic testing...Ch. 12 - Prob. 51PCh. 12 - Cathys Classic Clothes is a retailer that sells to...Ch. 12 - Pacific Rim Industries is a diversified company...
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