prepare a contribution format sepmented income statement

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prepare a contribution format sepmented income statement Powered By Docstoc
					deigo company manufates one produst that is sold for 80$ per unit in 2 regions east and west. The following information pertain
to the companys first year of operation in which it produced 40,000 units and sold 35,000 units
Variable costs per unit
  Manufacturing:
     Direct Materials                                          $         24.00
     Direct Labor                                              $         14.00
     Variable manufacturing overhead                           $          2.00
  Variable selling and administrative                          $          4.00
Fixed costs per year
     Fixed manufacturing overhead                              $ 800,000.00
     Fixed selling and administrative expenses                 $ 496,000.00
the company sold 25,000 units in the east and 10, 000 in the west region. It determined that 250,000 of its fixed selling and adm
expenses is traceable to the west region. 150,000 is traceable to the east region and the reaming 96,000 is commmon fixed cos
company will continue to incur the totoal amount of its fixed manufacturing overhead cost as long as it continues to produce any

what is the unit product cost under varible costing? What is the unit product cost under absorbtion costing?
                                                                                Absorption
                                                               Variable costing costing

1-2
           Direct materials
           Direct labor
           Variable manufacturing overhead
           Fixed manufacturing overhead
           Unit product cost

whatis the companys total contribution margin under varible costing
wha is thecompanys net operating income under varible costing
3-4
            Sales
            Variable expenses:
             Variable cost of goods sold
            Variable selling and administrative
            Contribution margin
            Fixed expenses:
              Fixed manufacturing overhead
              Fixed selling and administrative
            Net operating gain (loss)


what is the companys total gross margin under absorbtion costing
what is the companys net operating income under absorbtion costing
5-6         Sales
            Cost of goods sold
            Gross margin
            Selling and administrative expenses
            Net operating income

what is the amount of the differnece between the varible costing and the absortion costing net operating incomes?
what is the cause of the difference?
7           Variable costing net operating income
            Add: fixed manufacturing overhead
            deferred in inventory under absorption costing                                       units
            Absorption costing net operating income                                              per unit
what is the companys break-even point in unit sales? Is it above or below the actual sales volume?
8           Profit        =     Unit CM X Q - Fixed expenses




if the sales volumes in the east and west regions had been revearsed, what would the companys
overall breakeven point in unit sales
9




what would have been the companys varible costing net operating operating income if it had produced and sold 35,000 units
what would have been the companys absorbtion costing net operating income if it had produced and sold 35,000 units
10-11     Sales
          Variable expenses:
            Variable cost of goods sold
            Variable selling and administrative
          Contribution margin
            Fixed manufacturing overhead
            Fixed selling and administrative


if the company produces 5,000 fewer units than it sells in its second year of operations, will absorbtion costing net
operating income be higher or lower than the varible costing net operationg income in year 2? Why?
         12




prepare a contribution format sepmented income statement that includes a total column and columns for east and west regions
13                                              Total            East              West
           Sales
           Variable expenses
           Contribution margin
           Traceable fixed expenses
           Region segment margin
           not traceable to regions
           Net operating gain (loss)

deigo is considering eliminating the west region beacause an internall generated report suggest the regions total grass margin in
first year of operations wa 50,000 less than its traceable fixed sellingand administration expenses. Deigo believes that if it drops
willgrow by 5% in year 2. using the contribution approachfor analzing segment profitability and assuming all else remains the sam
what would be the profit impact of dropping the west region in year 2?
         14 Foregone segment margin in the West region
              Additional contribution margin in the East region
              Increase (decrease) in profits if the West region is dropped
assume the west regioninvests30,000 in a new advertising campaign in year 2 that increses its unitsales by 20%. If all else rema
constant, what would be the profit impact of pursing impact of pursing the advertising campaign
15.        Additional advertising
           Additional contribution margin in the West region
           Increase in profits
The following information pertains




0,000 of its fixed selling and administartive
ng 96,000 is commmon fixed cost. The
 g as it continues to produce any amount of its only product




perating incomes?
oduced and sold 35,000 units
 d and sold 35,000 units




orbtion costing net




umns for east and west regions




 the regions total grass margin in the
es. Deigo believes that if it drops the west region the east sales
 ssuming all else remains the samein year 2
unitsales by 20%. If all else remains

				
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posted:5/29/2012
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