Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 15E
Exercise 6-15A Segment elimination decision
Dudley Transport Company divides its operations into four divisions. A recent income statement for its West Division follows:
| DUDLEY TRANSPORT COMPANY West Division Income Statement for the Year 2019 |
|
| Revenue | $ 300,000 |
| Salaries for drivers | (210,000) |
| Fuel expenses | (30,000) |
| Insurance | (42,000) |
| Division-level facility-sustaining costs | (24,000) |
| Companywide facility-sustaining costs | (78,000) |
| Net loss | $ (84,000) |
Required
- a. Should West Division be eliminated? Support your answer by explaining how the division’s elimination would affect the net income of the company as a whole. By how much would companywide income increase or decrease?
- b. Assume that West Division is able to increase its revenue to $324,000 by raising its prices. Would this change the decision you made in Requirement a? Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated if revenue were $324,000.
- c. What is the minimum amount of revenue required to justify continuing the operation of West Division?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Exercise 14-22 (Algo) Compute Divisional Income (LO 14-1)
Arlington Clothing, Inc., shows the following information for its two divisions for year 1.
Lake Region
Coastal Region
Sales revenue
$
4,110,000
$
13,020,000
Cost of sales
2,666,300
6,510,000
Allocated corporate overhead
246,600
781,200
Other general and administration
548,900
3,750,000
Required:
a. Compute divisional operating income for the two divisions. Ignore taxes.
Question 2
Dickson Group has two divisions. The following statement shows the financial result
of each division for the year ended 2020.
Year 2020
Division B
Division A
Product type
Equipment B
Component A
Sales volume
72,000 units
140,000 units
$00
$00
Sales revenue
720,000
196,000
Variable costs
(382,000)%23
(140,000)
Contribution
338,000
56,000
Fixed costs
60,000
(20,000)
Operating profit
278,000
36,000
# include buying components from Division A.
Division A manufactures one type of component only. It sells the components to
external customers and also to Division B. The following information is available:
Division A
Current production capacity
140,000 units
Sold to Division B
72,000 units
Sold to external markets 68,000 units
External market demand for Component A
Market price $1500 per unit
112,000 units
The current policy of the group is that internal sales 72,000 units should be
transferred at their opportunity cost. Consequently, some components were
transferred to Division B…
Exercise 12-37 (Algo) Alternative Allocation Bases (LO 12-5)
Giardin Outdoors is a recreational goods retailer with two divisions: Online and Stores. The two divisions both use the services of the
corporate Finance and Accounting (F and A) Department. Annual costs of the F and A Department total $5.235 million a year.
Managers in the two operating divisions are measured based on division operating profits.
The following selected data are available for the two operating divisions:
Online
Stores
Revenues
($000)
$ 75,500
41,300
Transactions
(000)
1,416.5
458.5
Required:
a. What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis?
b. What is the F and A cost that is charged to each division if the the number of transactions is used as the allocation basis?
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
Knowledge Booster
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.Similar questions
- Support Department Allocations The centralized computer technology department of Hardy Company has expenses of $458,500. The department has provided a total of 13,100 hours of service for the period. The Retail Division has used 5,109 hours of computer technology service during the period, and the Commercial Division has used 7,991 hours of computer technology service. How much should each division be allocated for computer technology department services? Do not round interim calculations. Retail Division $ Commercial Division $arrow_forwardOriginal costs Proportion of Administrative hours used Proportion of Information Systems hours used Proportion of Maintenance hours used (a) Total costs Administrative Institutional $77,000 0.20 Operating Segments 0.10 Support Departments Information Systems Maintenance $110,600 $62,000 0.10 Retail 0.10 0.10 0.10 Operating Segments Institutional Retail $649,000 $351,000 0.45 0.40 Determine the total costs that each operating segment would be accountable for if support costs are allocated using the direct method. (Round interme 0.30 0.35 0.30 0.50arrow_forwardService Department A Service Department B Producing Department C Producing Department D Direct costs $114,400 76,400 22,400 28,200 Proportion of service by A to: B 10% C 60% 30% D Proportion of service by B to: A 30% C 20% D 50% Using the reciprocal (simultaneous solution) method, Department A's cost allocated to Department C (rounded to the nearest whole dollar) is:arrow_forward
- Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Operations Transactions Transactions Total 8 18% 70% $ 310,000 IT Costs Operations S 250,000 $ 750,000 670,000 x 1,510,000 x Using Department Operations 8 8 8 $ $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. x Answer is complete but not entirely correct. Allocated to: Transactions 250,000 XS 2,233,333 x $ 8 30% 8 $ 1,570,000 $ 3,770,000 Retail 0X X $ Retail OX 0x 0 Commercial S 70% 30% 18% 833,333 X 0x 0 x 833,333 Commercial 30% 38% 28 $ 2,320,000arrow_forwardDepartmental Cost Allocation Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service depart- ment's efforts (in percentages) to the other departments is: To From S1 S2 P1 P2 S1 10% 20% ?% S2 10% 30 The direct operating costs of the departments (including both variable and fixed costs) are: S1 $180,000 S2 60,000 P1 50,000 P2 120,000 Required 1. Determine the total cost of P1 and P2 using the direct method. 2. Determine the total cost of P1 and P2 using the step method. 3. Determine the total cost of P1 and P2 using the reciprocal method.arrow_forwardExercise 14-25 (Algo) Compute Divisional Income (LO 14-1) Owen Audio shows the following information for its two divisions for year 1. Consumer Division Commercial Division Sales revenue Cost of sales $ 1,864,800 Selling, General and Administrative Allocated corporate overhead 1,118,880 287,400 129,960 $ 5,905,200 3,791,100 360,840 411,540 Required: a. Compute divisional operating income for the two divisions. Ignore taxes. b-1. What are the gross margin and operating margin percentages for both divisions? b-2. How well have these divisions performed? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Compute divisional operating income for the two divisions. Ignore taxes. Operating income Consumer Division Commercial Division Req A Req B1 >arrow_forward
- 22. Question Content Area Support Department Allocations The centralized computer technology department of Hardy Company has expenses of $28,000. The department has provided a total of 2,000 hours of service for the period. The Retail Division has used 1,620 hours of computer technology service during the period, and the Commercial Division has used 380 hours of computer technology service. How much should each division be allocated for computer technology department services? Do not round interim calculations. Retail Division $ Commercial Division $arrow_forwardDepartmental Cost Allocation Robinson Products Company has two service departments(S1 and S2) and two production departments (P1 and P2). The distribution of each service department’s efforts (in percentages) to the other departments is:ToFrom S1 S2 P1 P2S1 — 10% 20% ?%S2 10% — ? 30The direct operating costs of the departments (including both variable and fixed costs) are:S1 $180,000S2 60,000P1 50,000P2 120,000Required1. Determine the total cost of P1 and P2 using the direct method.2. Determine the total cost of P1 and P2 using the step method.3. Determine the total cost of P1 and P2 using the reciprocal method.arrow_forwardces Exercise 6-5 (Algo) Companywide and Segment Break-Even Analysis [LO6-5] Piedmont Company segments its business into two regions-North and South. The company prepared the contribution format segmented income statement as shown: Total Company North $ 937,500 Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income 637,500 300,000 152,000 $ 750,000 600,000 150,000 76,000 South $ 187,500 37,500 150,000 76,000 148,000 $ 74,000 $ 74,000 64,000 $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region. (For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.) 1. Dollar sales for company to break even 2. Dollar sales for North segment to break even 3. Dollar sales for South segment to break…arrow_forward
- Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Operations Transactions Transactions Total 8 10% 70% $ 310,000 IT Using Department Operations Costs Operations S 250,000 $ 750,000 670,000 X 1,510,000 x 8 8 8 $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Answer is complete but not entirely correct. Allocated to: Transactions $ 250,000 $ 2,233,333 x 8 30% 8 $ 1,570,000 $ Retail Retail 0X $ 0.x 0x 0 Commercial S $ 3,770,000 78% 30% 10% 833,333 X 0x 0x 833,333 Commercial 36% 38% 28% $ 2, 320, 000arrow_forwardAlgebraic method The following chart indicates the percentage of support department services used by other departments. Service departments are designated S1, S2, and S3; operating departments are designated RP1 and RP2. Services Used S3 Department S1 S2 N/A 10% 40% N/A S1 S2 S3 20 30 N/A RP1 RP2 20% 30% 40% 30 20 10 40 10 Direct costs of the period were $170,000, $360,000, and $600,000 for S1, S2, and S3, respectively. Allocate the support department costs to the operating departments using the algebraic method. Note: Do not round proportions in your calculations; round your final answer to the nearest whole dollar. Note: Round your final answers below to the nearest 100; for example, round 8,668 to 8,700.arrow_forwardRequired information The Ferre Publishing Company has three service departments and two operating departments. Selected data from a recent period on the five departments follow: Costs Number of employees Square feet of space occupied Hours of press time Departmental costs before allocations Allocations: Service Departments Administration Janitorial Maintenance $ 144,200 $ 108,150 $ 49,440 140 20,000 Administration costs Janitorial costs Maintenance costs Total costs after allocations 60 15,000 Administration $ The company allocates service department costs by the step-down method in the following order: Administration (number of employees), Janitorial (space occupied), and Maintenance (hours of press time). Service Departments Janitorial $ 144,200 $ 108,150 $ 35 10,000 Required: Using the step-down method, allocate the service department costs to the operating departments. (Please enter allocations from a department as negative and allocations to a department as positive. The line…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Introduction to Divisional performance measurement - ACCA Performance Management (PM); Author: OpenTuition;https://www.youtube.com/watch?v=pk8Mzoqr4VA;License: Standard Youtube License