applies to the questions displayed below.]Diego Company manufactures one product that is sold for $75 perunit in two geographic regions-the East and West regions. Thefollowing information pertains to the company's first year ofoperations in which it produced 46,000 units and sold 42,000 units.Variable costs per unit:Manufacturing:Direct materialsDirect laborVariable manufacturing overheadVariable selling and administrativeFixed costs per year:Fixed manufacturing overheadFixed selling and administrative expenseProfit willThe company sold 31,000 units in the East region and 11,000 units inthe West region. It determined that $200,000 of its fixed selling andadministrative expense is traceable to the West region, $150,000 istraceable to the East region, and the remaining $38,000 is a commonfixed expense. The company will continue to incur the total amount ofits fixed manufacturing overhead costs as long as it continues toproduce any amount of its only product.14. Diego is considering eliminating the West region because an internally generatedreport suggests the region's total gross margin in the first year of operations was$46,000 less than its traceable fixed selling and administrative expenses. Diegobelieves that if it drops the West region, the East region's sales will grow by 5% in Year2. Using the contribution approach for analyzing segment profitability and assuming allelse remains constant in Year 2, what would be the profit impact of dropping the Westregion in Year 2?< PrevbyS14 15$ 25$ 20$2$4of 15 ...$ 644,000$ 388,000Next >

Given in the question: The west region of the company has been dropped by the company which will…

2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Brofit will

2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Brofit will

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 29P: Jellison Company had the following operating data for its first two years of operations: Jellison...

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The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
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Petrillo Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve) is as follows: During the year, Petrillo had the following activity related to valve production: a. Production of valves totaled 20,600 units. b. A total of 135,400 pounds of direct materials was purchased at 5.36 per pound. c. There were 10,000 pounds of direct materials in beginning inventory (carried at 5.40 per pound). There was no ending inventory. d. The company used 36,500 direct labor hours at a total cost of 656,270. e. Actual fixed overhead totaled 110,000. f. Actual variable overhead totaled 168,000. Petrillo produces all of its valves in a single plant. Normal activity is 20,000 units per year. Standard overhead rates are computed based on normal activity measured in standard direct labor hours. Required: 1. Compute the direct materials price and usage variances. 2. Compute the direct labor rate and efficiency variances. 3. Compute overhead variances using a two-variance analysis. 4. Compute overhead variances using a four-variance analysis. 5. Assume that the purchasing agent for the valve plant purchased a lower-quality direct material from a new supplier. Would you recommend that the company continue to use this cheaper direct material? If so, what standards would likely need revision to reflect this decision? Assume that the end products quality is not significantly affected. 6. Prepare all possible journal entries (assuming a four-variance analysis of overhead variances).
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