Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Sales Revenue Cost of Goods sold Variable manufacturing costs Fixed manufacturing costs Gross Profit Operating Expenses Variable operating expenses Fixed operating expenses Net income Book Division $8,000,000 2,200,000 1,097,500 $4,702,500 155,000 2,936,000 $1,611,500 Magazine Division $3,384,600 1,096,700 1,251,500 $ 1,036,400 Complete this question by entering your answers in the tabs below. 227,300 1,200, 200 $ (391,100) Total $ 11,384,600 3,296,700 2,349,000 $5,738,900 382,300 4,136,200 $1,220,400 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: 1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated?

Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Sales Revenue Cost of Goods sold Variable manufacturing costs Fixed manufacturing costs Gross Profit Operating Expenses Variable operating expenses Fixed operating expenses Net income Book Division $8,000,000 2,200,000 1,097,500 $4,702,500 155,000 2,936,000 $1,611,500 Magazine Division $3,384,600 1,096,700 1,251,500 $ 1,036,400 Complete this question by entering your answers in the tabs below. 227,300 1,200, 200 $ (391,100) Total $ 11,384,600 3,296,700 2,349,000 $5,738,900 382,300 4,136,200 $1,220,400 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: 1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 41P: Shannon, Inc., has two divisions. One produces and sells paper party supplies (napkins, paper...

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Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Sales Revenue Cost of Goods sold Variable manufacturing costs Fixed manufacturing costs Gross Profit Operating Expenses Variable operating expenses Fixed operating expenses Net income Book Division $ 7,960,000 2,160,000 1,093,500 $4,706,500 151,000 2,932,000 $ 1,623,500 Contribution Margin Segment Margin Book Division Magazine Division $ 3,367,700 Complete this question by entering your answers in the tabs below. 1,076,800 1,241,200 $ 1,049,708 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions Required: Required 1 Required 2 Compute the contribution margin and segment margin…
Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division Total Sales Revenue $ 7,840,000 $ 3,316,900 $ 11,156,900 Cost of Goods sold Variable manufacturing costs 2,040,000 1,016,900 3,056,900 Fixed manufacturing costs 1,081,500 1,210,300 2,291,800 Gross Profit $ 4,718,500 $ 1,089,700 $ 5,808,200 Operating Expenses Variable operating expenses 139,000 203,900 342,900 Fixed operating expenses 2,920,000 1,191,200 4,111,200 Net income $ 1,659,500 $ (305,400) $ 1,354,100 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: Present the financial information in…
Anderson Publishing has two divisions: Book Publishing and Magazine Publishing. The Magazine division has been losing money for the last five years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division Total Sales Revenue $ 8,160,000 $ 3,452,300 $ 11,612,300 Cost of Goods sold Variable manufacturing costs 2,360,000 1,176,500 3,536,500 Fixed manufacturing costs 1,113,500 1,292,700 2,406,200 Gross Profit $ 4,686,500 $ 983,100 $ 5,669,600 Operating Expenses Variable operating expenses 171,000 250,800 421,800 Fixed operating expenses 2,952,000 1,209,100 4,161,100 Net income $ 1,563,500 $ (476,800) $ 1,086,700 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attributable to each division. The remaining are common or shared between the two divisions. Required: Compute the contribution margin and the…
A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Cost of goods sold Direct expenses Indirect expenses Service department costs Electric Guitar Division is: Sales Expenses: Should the division be eliminated? (Any loss amount should be indicated with minus sign.) Total expenses Net income (loss) Avoidable Expenses $ 56,000 9,250 470 6,000 Revenues from electric guitar division Avoidable expenses Revenues are greater than (less than) Kept Unavoidable Expenses Q $1,250 1,600 1,430 Eliminated < Prev i 5 of 5 D' HI Next C O
Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson’s information about the two divisions is as follows: Book Division Magazine Division Total Sales Revenue $ 7,800,000 $ 3,300,000 $ 11,100,000 Cost of Goods sold Variable costs 2,000,000 997,000 2,997,000 Fixed costs 1,077,500 1,200,000 2,277,500 Gross Profit $ 4,722,500 $ 1,103,000 $ 5,825,500 Operating Expenses Variable 135,000 198,000 333,000 Fixed 2,916,000 1,189,000 4,105,000 Net income $ 1,671,500 $ (284,000 ) $ 1,387,500 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the…
Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the last 5 years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Magazine Division Total Book Division $ 7,810,000 $ 3,310,000 $11,120,e00 Sales Revenue Cost of Goods sold Variable costs Fixed costs 3,003,000 278,600 2,003,000 77,600 $ 5,729,400 1,000,000 201,eee 2,109,e0e Gross Profit Operating Expenses Variable $ 7,838,400 136,000 3,917,000 $ 1,676,400 199,000 2,190,000 $ 335,000 6,107,000 $ 1,396,400 Fixed (280,eee) Net income The variable operating expenses are directly attributable to the division. Of the total fixed costs (manufacturing and operating), $4,001,000 are shared between the divisions, allocated $2,812,000 to the Book Division and the remaining to the Magazine Division The remainder of the fixed costs are directly attributable to each division. Required: 1. Present the…
A guitar manufacturer is considering eliminating its electric guitar division because its $85,730 expenses are higher than its $78,420 sales. The company reports the following expenses for this division. Cost of goods sold Direct expenses Indirect expenses Service department costs Electric Guitar Division is: Sales Expenses: Avoidable Expenses $ 59,000 10,150 Total expenses Net income (loss) Revenues from electric guitar division Avoidable expenses Revenues are greater than (less than) avoidable expenses by 800 8,200 Should the division be eliminated? (Any loss amount should be Indicated with minus sign.) Unavoidable Expenses Kept $ 2,550 2,500 2,530 Eliminated
Alydar, Inc., manufactures and sells automotive tools through three divisions: Eastern, Southern, and International. Each division is evaluated as a profit center. Data for each division for last year are as follows: Eastern Southern International Sales $3,150,000 $987,000 $6,500,000 Cost of goods sold 1,580,000 680,000 4,100,000 Selling and administrative expenses 337,000 280,000 620,000 Alydar, Inc., had corporate administrative expenses equal to $585,000; these were not allocated to the divisions. Required: 1. Prepare a segmented income statement for Alydar, Inc., for last year. Alydar, Inc. Segmented Income Statement For last year Eastern Total Southern International
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,600,000 700,400 899,600 990,000 $ (90,400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses East $ 440,000 $ 280,000 52% Division Central $ 620,000 $ 320,000 36% West $ 540,000 46% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $21,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much…
Req 1 Req 2A Req 2B Prepare a contributlon format Income statement segmented by dlvislons. Division Total Company East Central West Req 1 Req 2A Req 2B The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belief that it would increase that division's sales by 13%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.) Net operating income will by Req 1 Req 2A Req 2B Would you recommend the increased advertising? OYes No
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses $ 1,575, 000 659, 400 915, 600 1,007, 000 $ (01, 400) Net operating income (loss) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East $435, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses S600, 000 40% $326, 000 48% 39% $264, 000 $197,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would…
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement, which follows: Sales $1,603,000 635,970 Variable expenses 967,030 Contribution margin 1,064,000 Fixed expenses Net operating income (loss) $ (96,970) In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division West Central $393,000 $610,000 $600,000 East Sales Variable expenses as a percentage of sales Traceable fixed expenses 21% $280,000 $322,000 $ 190,000 59% 46% Required: 1. Prepare a contribution format income statement segmented by divisions, as desired by the president. Division Total East Central West Company 2- As a result of a marketing study, the president believes that sales in the a. West Division could be increased by 15% if monthly advertising in that…