Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 20BEA
1.
To determine
Calculate the amount of contribution margin for strip and plank line if parquet is dropped.
2.
To determine
Evaluate the most effective alternative (keep or drop the parquet) and its amount.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Accel Corp makes two products: C and D. The following data have been summarized
(Click the icon to view the data.)
Accel Corp desires a 28% target gross profit after covering all product costs. Considering the total
product costs assigned to the Products C and D, what would Accel have to charge the customer to
achieve that gross profit? Round to two decimal places
Begin by selecting the formula to compute the amount that the company should charge for each
product
Direct labor cost per unit
Direct materials cost per unit
Indirect manufacturing cost per unit
Product cost as a percentage of sales price
Target gross profit percentage
Total product cost per unit
Get more help.
Clear all
Show work
Required
sales
price per
unit
Check answer
The XYZ Company produces and sells two products: The Riffs and The Raffs. Below is revenue and cost information to facilitate the development of a basic segmented income statement.
Â
Â
Product
Â
Riffs
Raffs
Sales Price per unit
$8.00
6.00
Variable Cost per unit
$3.20
3.00
Traceable Fixed Costs
$62,000
$44,000
Â
It is expected that the company will incur $21,000 of common fixed expenses and unit sales are expected to be 12,000 of Riffs and 18,000 of Raffs.
Required:Â Construct a Contribution Format Income Statement segmented by product line and company total.
APPLY THE CONCEPTS:
Prepare a contribution margin income statement
Assume that you are part of the accounting team for Starr Productions. The company has only one product that sells for $40 per unit. Starr estimates total fixed costs to be $3,700. Starr estimates direct materials cost of $12.00 per unit, direct
labor costs of $15.00 per unit, and variable overhead costs of $3.00 per unit. The CEO would like to see what the gross margin and operating income will be if 600 units are sold in the next period. Prepare a contribution margin income statement.
Starr Productions
Contribution Margin Income Statement
Sales
Less: Variable costs
Contribution margin
Less: Fixed costs
Operating income
Chapter 8 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 8 - What is the difference between tactical and...Ch. 8 - Prob. 2DQCh. 8 - What role do past costs play in relevant costing...Ch. 8 - Explain why depreciation on an existing asset is...Ch. 8 - Give an example of a future cost that is not...Ch. 8 - Can direct materials ever be irrelevant in a...Ch. 8 - Why would a firm ever offer a price on a product...Ch. 8 - What is a segment?Ch. 8 - Prob. 9DQCh. 8 - Discuss the importance of complementary effects in...
Ch. 8 - Prob. 11DQCh. 8 - Suppose that a product can be sold at split-off...Ch. 8 - Prob. 13DQCh. 8 - Which of the following is not a step in the...Ch. 8 - Costs that cannot be affected by any future action...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Use the following information for Multiple-Choice...Ch. 8 - Which of the following statements is false? a....Ch. 8 - Prob. 7MCQCh. 8 - In a make-or-buy decision, a. the company must...Ch. 8 - Carroll Company, a manufacturer of vitamins and...Ch. 8 - Prob. 10MCQCh. 8 - Garrett Company provided the following...Ch. 8 - Jennings Hardware Store marks up its merchandise...Ch. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - In the sell-or-process-further decision, a. joint...Ch. 8 - Structuring a Make-or-Buy Problem Fresh Foods, a...Ch. 8 - Structuring a Special-Order Problem Harrison Ford...Ch. 8 - Segmented Income Statement Gorman Nurseries Inc....Ch. 8 - Prob. 19BEACh. 8 - Prob. 20BEACh. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Calculating Price by Applying a Markup Percentage...Ch. 8 - Calculating a Target Cost Yuhu manufactures cell...Ch. 8 - Structuring a Make-or-Buy Problem Coed Scents, a...Ch. 8 - Structuring a Special-Order Problem Rabbit Foot...Ch. 8 - Prob. 28BEBCh. 8 - Use the following information for Brief Exercises...Ch. 8 - Use the following information for Brief Exercises...Ch. 8 - Structuring the Sell-or-Process-Further Decision...Ch. 8 - Prob. 32BEBCh. 8 - Prob. 33BEBCh. 8 - Prob. 34BEBCh. 8 - Brief Exercise 8-35 Calculating a Target Cost...Ch. 8 - Model for Making Tactical Decisions The model for...Ch. 8 - Prob. 37ECh. 8 - Use the following information for Exercises 8-38...Ch. 8 - Prob. 39ECh. 8 - Prob. 40ECh. 8 - Prob. 41ECh. 8 - Prob. 42ECh. 8 - Prob. 43ECh. 8 - Prob. 44ECh. 8 - Prob. 45ECh. 8 - Sell at Split-Off or Process Further Bozo Inc....Ch. 8 - Use the following information for Exercises 8-47...Ch. 8 - Prob. 48ECh. 8 - Calculating Price Using a Markup Percentage of...Ch. 8 - Target Costing H. Banks Company would like to...Ch. 8 - Keep or Buy, Sunk Costs Heather Alburty purchased...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Use the following information for Exercises 8-52...Ch. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Segmented Income Statement, Management Decision...Ch. 8 - Make or Buy, Qualitative Considerations Hetrick...Ch. 8 - Sell or Process Further Zanda Drug Corporation...Ch. 8 - Keep or Drop AudioMart is a retailer of radios,...Ch. 8 - Accept or Reject a Special Order Steve Murningham,...Ch. 8 - Cost-Based Pricing Decision Jeremy Costa, owner of...Ch. 8 - Product Mix Decision, Single Constraint Sealing...Ch. 8 - Special-Order Decision, Qualitative Aspects Randy...Ch. 8 - Sell or Process Further, Basic Analysis Shenista...Ch. 8 - Product Mix Decision, Single Constraint Norton...Ch. 8 - Sell at Split-Off or Process Further Eunice...Ch. 8 - Differential Costing As pointed out earlier in...Ch. 8 - Prob. 68CCh. 8 - Keep or Drop a Division Jan Shumard, president and...
Knowledge Booster
Similar questions
- Use the information below to answer the following two questions: Ginger Company's relevant range of production is 5,000 units to 13,000 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Q. If 12,500 units are produced, what is the manufacturing overhead cost per unit incurred to support this level of production? A. (Click to select) Q. If 12,500 units are produced and sold, the company will incur $60,000 in total period costs. How much is the variable administrative expense per unit? A. (Click to select) per unit Average Cost $4.80 $ 3.50 $1.30 $3.00 $2.50 $1.00 $0.50 ? âś“per unitarrow_forwardUse the information below to answer the following question(s). Franscioso Company sells several products. Information of average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.25 Direct manufacturing labour $1.15 Manufacturing overhead $0.25 Selling costs $1.85 Annual fixed costs $110,000 The Franscioso Company contribution margin ratio is O A. 0.702:1. O B. 1.425:1. O C. 0.298:1. O D. 1.102:1. O E. 0.637:1.arrow_forwardSpectrum Corp. makes two products: C and D. The following data have been summarized: (Click the icon to view the data.) Spectrum Corp. desires a 27% target gross profit after covering all product costs. Considering the total product costs assigned to the Products C and D, what would Spectrum have to charge the customer to achieve that gross profit? Round to two decimal places. Begin by selecting the formula to compute the amount that the company should charge for each product. Total product cost per unit Spectrum should charge 2091.10 for Product C. Data table Direct materials cost per unit Direct labor cost per unit Indirect manufacturing cost per unit Total costs assigned Print Product cost as a percentage of sales price Product C $ 900.00 $ 400.00 226.50 $ 1,526.50 $ Done Product D 2,400.00 100.00 531.00 3,031.00 X = Required sales price per unit Garrow_forward
- Hummingbird Company uses the product cost method of applying the cost-plus approach to product pricing. The costs and expenses of producing 25,000 units of Product K are as follows: Variable costs per unit: Direct materials $2.50 Direct labor 4.25 Factory overhead 1.25 Selling and administrative expenses 0.50 Total 8.50 Fixed costs: Factory overhead $25,000 Selling and administrative expenses 17,000 Hummingbird desires a profit equal to a 5% return on invested assets of $642,500. a. Determine the amount of desired profit from the production and sale of Product K. b. Determine the total manufacturing costs and the cost amount per unit for the production of 25,000 units of Product K. Total manufacturing costs Cost amount per unit c. Determine the markup percentage for Product K. Round your answer to one decimal place. d. Determine the selling price of Product K. Round your answer to two decimal places.arrow_forwardLillibridge & Friends, Incorporated provides you with the following data for its single product: Sales price per unit Fixed costs (per quarter): Selling, general, and administrative (SG&A) Manufacturing overhead Variable costs (per unit): Direct labor Direct materials Manufacturing overhead SG&A Number of units produced per quarter Required: $ 60 1,500,000 4,500,000 9 12 10 6 500,000 units Compute the amounts for each of the following assuming that the production levels are within the relevant range if the number of units is 500,000 per quarter. Also calculate if the number of units increases to 600,000 per quarter. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a. Prime cost per unit b. Contribution margin per unit c. Gross margin per unit d. Conversion cost per unit e. Variable cost per unit f. Full absorption cost per unit g. Variable production cost per unit h. Full cost per unit 500,000 units 600,000 unitsarrow_forwardCaribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management. The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required: In attempting to achieve better results in the marketplace, management has been looking at changing the reward system for marketing, distribution and sales personnel. This would result in an increase in variable marketing and administrative costs by $2 per unit, and would reduce fixed…arrow_forward
- Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required:  Calculate breakeven point in units and the quanity of units which need to be sold to earn a target annual profit of 120000 dollarsarrow_forwardCaribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required: In attempting to achieve better results in the marketplace, management has been looking at changing the reward system for marketing, distribution and sales personnel. This would result in an increase in variable marketing and administrative costs by $2 per unit, and would reduce fixed…arrow_forwardStancil Dry Cleaners has determined the following about its​ costs: Total variable expenses are$42,000​,total fixed expenses are $24,000, and the sales revenue needed to break even is $48,000. Determine the​ company's current​ 1) sales revenue and​ 2) operating income. ​(​Hint:​ First, find the contribution margin​ ratio; then prepare the contribution margin income​ statement.)    Use the contribution margin income statement and the shortcut contribution margin approaches to determine Stancil's current​ (1) sales revenue and​ (2) operating income. Begin by computing the contribution margin ratio. ​(Enter the result as a whole​ number.) The contribution margin ratio is  %.arrow_forward
- Stancil Dry Cleaners has determined the following about its​ costs: Total variable expenses are$42,000​,total fixed expenses are $24,000, and the sales revenue needed to break even is $48,000. Determine the​ company's current​ 1) sales revenue and​ 2) operating income. ​(​Hint:​ First, find the contribution margin​ ratio; then prepare the contribution margin income​ statement.)    Use the contribution margin income statement and the shortcut contribution margin approaches to determine Stancil's current​ (1) sales revenue and​ (2) operating income. Begin by computing the contribution margin ratio. ​(Enter the result as a5 whole​ number.) The contribution margin ratio is 50 %. Prepare the contribution margin income statement at the calculated sales level. NOTE: the other picture is to show the options.arrow_forwardVoice Com, Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 4,950 cell phones are as follows: Variable costs per unit: Direct materials Direct labor Factory overhead Selling and administrative expenses Total variable cost per unit $69 32 26 20 Fixed costs: Factory overhead Selling and administrative expenses Voice Com desires a profit equal to a 15% return on invested assets of $600,500. $147 > a. Determine the amount of desired profit from the production and sale of 4,950 cell phones. 90,075 $199,200 68,900 b. Determine the product cost per unit for the production of 4,950 cell phones. Round your answer to the nearest whole dollar. -158 X per unit Total Cost c. Determine the product cost markup percentage for cell phones. Round your answer to two decimal places. -66 X % Markup Selling price d. Determine the selling price of cell phones. Round your answers to the nearest whole dollar. per unit per unit per unitarrow_forwardWrite a linear cost function equation for each of the following conditions. Use y for estimated costsand X for activity of the cost driver.a. Direct materials cost is $2.70 per pound b. Total cost is fixed at $800 per month regardless of the number of units produced. c. Auto rental has a fixed fee of $90.00 per day plus $1.75 per mile driven. d. Machine operating costs include $1,000 of maintenance per month, and $15.00 of coolant usagecosts for each day the machinery is in operation.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning