314Chapter 11Management is concerned about the continued losses shown by the roundtrampolines and wants a recommendation as to whether or not the line shouldbe discontinued. The special equipment used to produce the trampolines hasno resale value. If the round trampoline model is dropped, the two linesupervisors assigned to the model would be discharged.Required:1. Should production and sale of the round trampolines be discontinued?You may assume that the company has no other use for the capacity nowbeing used to produce the round trampolines. Show computations tosupport your answer.2. Recast the above data in a format that would be more usable tomanagement in assessing the long-run profitability of the various productlines. Problem 2 (Eliminate or Retain a Product Line)Cystal Sports Equipment manufactures round, rectangular, and octagonaltrampolines. Data on sales and expenses for the past month follow:TotalP1,000,000D410,000TrampolineRectangular OctagonalP500,000200,000300,000RoundSales.Less variable expenses.Contribution marginLess fixed expenses:Advertising - traceable .Depreciation of special equipmentLine supervisors' salaries. .General factory overhead*.Total fixed expenses ..Net operating income (loss) .P140,00060,00080,000P360,000150,000210,000...590,000216,00095,00019,000200,000530,000P 60,00041,00020,0006,00028,00095,000P(15.000)110,00040,0007,000100,000257,000P 43,00065,00035,0006,00072,000178,000Р 32,000*A common fixed cost that is allocated on the basis of sales pesos.

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Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model would be discharged. Required: 1. Should production and sale of the round trampolines be discontinued? You may assume that the company has no other use for the capacity now being used to produce the round trampolines. Show computations to support your answer. 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines.

Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model would be discharged. Required: 1. Should production and sale of the round trampolines be discontinued? You may assume that the company has no other use for the capacity now being used to produce the round trampolines. Show computations to support your answer. 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 22E

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be discontinued. The special equipment used to produce the trampolines has A common fixed cost that is allocated on the basis of sales pesos. supervisors assigned to the model would be discharged.. Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should no resale value. If the round trampoline model is dropped, the two line Problem 2, page 313-Crystal Sports Equipment (Eliminate or Retain Product Line) Requirement: Compute the increase/decrease in net operating income if the production and sale of the round trampolines is continued. Problem 2 (Eliminate or Retain a Product Line) Crystal Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data on sales and expenses for the past month follow: Round P140,000 60,000 80,000 Trampoline Rectangular Octagonal P500,000 200,000 300,000 Total Sales Less variable expenses. Contribution margin.. Less fixed expenses: P360,000 P1,000,000…
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