Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
thumb_up100%
Chapter 17, Problem 24P
1.
To determine
Indicate the amount of income that would be increased or decreased, if the Company drops property insurance and provide supporting computations.
2.
To determine
Prepare a segmented income statement of D for the given situation and describe whether the advertising should be increased.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Top managers of Movie Street are alarmed by their operating losses. They are considering dropping the DVD product line. Company
accountants have prepared the following analysis to help make this decision:
Assume that Movie Street can avoid $39,000 of fixed costs by dropping the DVD product line (these costs are direct fixed costs of the DVD
product line).
E (Click the icon to view the analysis.)
Prepare a differential analysis to show whether Movie Street should stop selling DVDS. (Enter decreases to revenues with a parentheses or
minus sign.)
Expected decrease in revenues
Data Table
Expected decrease in costs:
Variable costs
Movie Street
Fixed costs
Income Statement
Expected decrease in total costs
For the Year Ended December 31, 2018
Expected
| in operating income
Total
Blu-ray Discs
DVD Discs
Decision:
Net Sales Revenue
$
424,000 $
300,000 $
124,000
248,000
153,000
95,000
Variable Costs
Contribution Margin
176,000
147,000
29,000
Fixed Costs:
Manufacturing
130,000
74,000
56,000…
Top managers of Vermont Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this decision in the chart below:
Total fixed costs will not change if the company stops selling laminate flooring.
Requirements
1. Prepare an incremental analysis to show whether Vermont Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain.
2. Assume that the company can avoid $32,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring.
3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if the company stops selling laminate flooring. However,…
Top managers of Vermont Flooring are alarmed by their operating losses. They are considering dropping the laminate flooring product line. Company accountants have prepared the following analysis to help make this decision in the chart below:
Total fixed costs will not change if the company stops selling laminate flooring.
Requirements
1. Prepare an incremental analysis to show whether Vermont Flooring should discontinue the laminate flooring product line. Will discontinuing laminate flooring add $28,000 to operating income? Explain.
2. Assume that the company can avoid $32,000 of fixed expenses by discontinuing the laminate flooring product line (these costs are direct fixed costs of the laminate flooring product line). Prepare an incremental analysis to show whether the company should stop selling laminate flooring.
3. Now, assume that all of the fixed costs assigned to laminate flooring are direct fixed costs and can be avoided if the company stops selling laminate flooring. However,…
Chapter 17 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 17 - What is tactical decision making?Ch. 17 - Tactical decisions are often small-scale decisions...Ch. 17 - What is tactical cost analysis? What steps in the...Ch. 17 - What is a relevant cost? Explain why depreciation...Ch. 17 - Give an example of a future cost that is not...Ch. 17 - Prob. 7DQCh. 17 - Can direct materials ever be irrelevant in a...Ch. 17 - What role do past costs play in tactical cost...Ch. 17 - When will flexible resources be relevant to a...Ch. 17 - Prob. 11DQ
Ch. 17 - Prob. 12DQCh. 17 - Prob. 13DQCh. 17 - Prob. 14DQCh. 17 - Why would a firm ever offer a price on a product...Ch. 17 - Each year, Basu Company produces 18,000 units of a...Ch. 17 - Reshier Company makes three types of rug...Ch. 17 - Sequoia Paper Products, Inc., manufactures boxed...Ch. 17 - Betram Chemicals Company processes a number of...Ch. 17 - Prob. 5ECh. 17 - Elliott, Inc., has four salaried clerks to process...Ch. 17 - Prob. 7ECh. 17 - Feinan Sports, Inc., manufactures sporting...Ch. 17 - Wehner Company is currently manufacturing Part...Ch. 17 - Brees, Inc., a manufacturer of golf carts, has...Ch. 17 - Prob. 11ECh. 17 - Nutterco, Inc., produces two types of nut butter:...Ch. 17 - Carleigh, Inc., is a pork processor. Its plants,...Ch. 17 - Global Reach, Inc., is considering opening a new...Ch. 17 - Tony and Tina Roselli own and run TNTs Pizza...Ch. 17 - Jason Rogers works full-time for UPS and runs a...Ch. 17 - Prob. 17ECh. 17 - A company is considering a special order for 1,000...Ch. 17 - Walloon Company produced 150 defective units last...Ch. 17 - Pasha Company produced 50 defective units last...Ch. 17 - Future costs that differ across alternatives are:...Ch. 17 - Thaler Company bought 26,000 of raw materials a...Ch. 17 - Norton Products, Inc., manufactures...Ch. 17 - Prob. 24PCh. 17 - Fiorello Company manufactures two types of...Ch. 17 - St. Johns Medical Center (SJMC) has five medical...Ch. 17 - Brandy Dees recently bought Nievo Enterprises, a...Ch. 17 - Apollonia Dental Services is part of an HMO that...Ch. 17 - Pharmaco Corporation buys three chemicals that are...Ch. 17 - KarlAuto Corporation manufactures automobiles,...Ch. 17 - Morrill Company produces two different types of...Ch. 17 - Paladin Company manufactures plain-paper fax...
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
- SnowDelight operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. (Click the icon to view the information.) Read the requirements. Requirement 1. If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate SnowDelight's projected income Revenue at market price Less: Total costs Operating income Requirements 1 If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? 2 Assume SnowDelight has found ways to cut its fixed costs to $36.000,000 What is its new target variable cost per skier/snowboarder?arrow_forwardSnowDelight operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. (Click the icon to view the information.) Read the requirements. C Requirement 1. If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate SnowDelight's projected income. Revenue at market price Less: Total costs 63075000 6075000 8.3 Operating income (Round the percentage to the nearest hundredth percent, X.XX%.) %. SnowDelight's projected operating income (profit) as a percent of assets amounts to Will investors be happy with this profit level? More info *** O a 6 9 K tab CAK je Q A W S tt 3 E D 4 C R % TI F 5 T G & 7 H U 8 J Oarrow_forwardSkiable Acres operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. (Click the icon to view the information.) Read the requirements. Requirement 1. If Skiable Acres cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate Skiable Acres's projected income. Revenue at market price Less: Total costs i More Info Operating income (Round the percentage to the nearest hundredth percent, X.XX%.) Investors would like to earn a 10% return on investment on the company's $270,000,000 of assets. Skiable Acres projects fixed costs to be $31,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $13 per guest. Last year, due to its favorable reputation, Skiable Acres was a price-setter and was able to charge $3 more per lift ticket than…arrow_forward
- Skiable Acres operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Click the icon to view the information.) Read the requirements. Requirement 1. If Skiable Acres cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Complete the following table to calculate Skiable Acres' projected income. Revenue at market price Less: Total costs Operating incomearrow_forwardKC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels are marginal to the company’s business. She estimates that doing so will result in lost revenues of $59,000 per year (including the lost tree business from customers who use the company for both services). The present manager will continue to supervise the tree services with no reduction in salary. Without the lawn business, Kate estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also expects to save 15 percent on rent and utilities. Required: a. Prepare a report of the differential costs and revenues if the lawn service is discontinued. (Enter loss amount with minus sign.) KC SERVICES Annual Income Statement…arrow_forwardHow do I calculate the profit that would result form dropping Conwayarrow_forward
- The management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $179,000 of the fixed manufacturing expenses and $155,200 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued. Required: What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Net operating income (loss) would $ 745,000 $ 387,000 $ 253,400 $216,200 decline increase by if product B90D were dropped. Therefore, the product droppedarrow_forwardDay Street Deli’s owner is disturbed by the poor profit performance of his ice cream counter.He has prepared the following profit analysis for the year just ended: he owner is thinking the elimination of this counter. If it is eliminated then: ✓ Depreciation of counter equipment is avoidable ✓ The supervisory salaries is avoidable✓ The insurance expense is unavoidable ✓ The depreciation of building unavoidable ✓ The general overhead is unavoidable Required:a) Should the company eliminate the counter or not? Show your calculations and justify your answer.b) Mention at least three relevant costs.arrow_forwardBright 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?arrow_forward
- Suppose Crispy Pop is considering discontinuing its fruit and nuts product line. Assume that during the past year, the fruit and nuts' product line income statement showed the following: (Click the icon to view the income statement data.) (Click the icon for additional information.) If the company decides to discontinue the product line, what will happen to the company's operating income? Should Crispy Pop discontinue the fruit and nuts product line? Begin by preparing a contribution margin income statement for the fruit and nuts' product line. (Use a minus sign or parentheses to enter a loss.) Sales revenue Less: Variable expenses Contribution margin 5250000 Data table Less: Fixed expenses Operating income (loss) More info Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the fruit and nuts line is just one of the company's fruit operations, only $775,000 of direct fixed costs (the majority of which is…arrow_forwardA payday loan company has decided to open several new locations in a city and hires consultants to decide where to open these locations. The consultants are paid per store that is opened, and at the end of the quarter, the company notices a many of the new stores' sales volume fail to meet expectations. To incentivize the consultants to instead focus on opening profitable stores, the company decided to alter the compensation to a percentage of the profit earned per new store. This puts the consultants_ and the payday loan company should expect to compensate for this change. to Group of answer choices 1. In a less risky position; pay the consultants more than they would in the per- store scheme 2. A more risky position; pay the consultants less than they would in the per- store scheme 3. In a less risky position; pay the consultants less than they would in the per- store scheme 4. A more risky position; pay the consultants more than they would in the per- store schemearrow_forwardThe president of Midnight Rambler wants to know if he should allow Jack Flash to have the scooters for $120,000. Determine the effect on profits from accepting Jack Flash’s offer. Briefly explain why certain costs should be omitted from the analysis in requirement (a.) Assume Midnight Rambler is operating at capacity and could sell the 300 scooters at its regular markup: Determine the Opportunity Cost of accepting Jack Flash’s offer. Determine the effect on profits of accepting Jack Flash’s offer What other factors should Midnight Rambler consider before deciding to accept the special order?arrow_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 LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeBusiness/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage