If Weak is dropped, then Average will report allocated expenses of $_____ resulting in an select an (Operating Income, Operating Loss), of $______for the division. Wildhorse, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operatingincome, and the president wants to close it. "Survival of the fittest, I say!" was his response when the Weak division's manager, insistedChris, that his division earned money for the company. Following is the most recent financial analysis for each division:WeakAverageStrongSales revenue$ 126,900$ 450,000$ 527,600Variable expenses57,000246,000300,500Contribution margin69,900204,000227,100Direct expenses30,60077,800113,200Allocated expenses69,00069,00069,000Operating income$(29,700)$ 57,200$ 44,900 Based on the way allocated expenses are divided among the divisions, what do you think will happen to the Average division if thecompany continues to prepare financial statements in this way, assuming Weak was dropped?

Solution: Total allocated expense = Allocated to all 3 divisions = 69000 + 69000+ 69000 = $207,000…

Answered: $ 126,900 $ 450,000 $ 527,600 57,000…

$ 126,900 $ 450,000 $ 527,600 57,000 246,000 300,500 69,900 204,000 227,100 30,600 77,800 113,200 69,000 69,000 69,000 $(29,700) $ 57,200 $ 44,900

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Oriole, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operating income, and the president wants to close it. “Survival of the fittest, I say!” was his response when the Weak division’s manager insisted that his division earned money for the company. Following is the most recent financial analysis for each division: Weak Average Strong Sales revenue $125,200 $349,800 $524,500 Variable expenses 55,000 192,300 302,200 Contribution margin 70,200 157,500 222,300 Direct expenses 32,900 75,100 116,600 Allocated expenses 59,800 59,800 59,800 Operating income $(22,500 ) $22,600 $45,900 (a) Prepare a revised income statement showing the segment margin for each division. Weak Average Strong Total Variable expenseOperating income Contribution margin Direct costs Allocated…
Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Dunn Company’s six divisions. Veronica made the following presentation to Dunn’s board of directors and suggested the Percy Division be eliminated. “If the Percy Division is eliminated,” she said, “our total profits would increase by $26,200.” The OtherFive Divisions PercyDivision Total Sales $1,663,000 $100,100 $1,763,100 Cost of goods sold 978,600 76,800 1,055,400 Gross profit 684,400 23,300 707,700 Operating expenses 526,000 49,500 575,500 Net income $158,400 $ (26,200 ) $132,200 In the Percy Division, cost of goods sold is $59,300 variable and $17,500 fixed, and operating expenses are $31,400 variable and $18,100 fixed. None of the Percy Division’s fixed costs will be eliminated if the division is discontinued.Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your…
Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Dunn Company’s six divisions. Veronica made the following presentation to Dunn’s board of directors and suggested the Percy Division be eliminated. “If the Percy Division is eliminated,” she said, “our total profits would increase by $25,700.” The OtherFive Divisions PercyDivision Total Sales $1,663,000 $100,900 $1,763,900 Cost of goods sold 977,800 76,100 1,053,900 Gross profit 685,200 24,800 710,000 Operating expenses 526,900 50,500 577,400 Net income $158,300 $ (25,700 ) $132,600 In the Percy Division, cost of goods sold is $59,300 variable and $16,800 fixed, and operating expenses are $30,400 variable and $20,100 fixed. None of the Percy Division’s fixed costs will be eliminated if the division is discontinued.Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your…
Carla Vista, Inc operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operating income, and the president wants to close it. "Survival of the fittest, I say!" was his response when the Weak division's manager, insisted Joseph, that his division earned money for the company. Following is the most recent financial analysis for each division: Weak $125,400 53.900 71.500 35,100 68.600 $(32.200) Sales revenue Variable expenses Contribution margin Direct expenses Allocated expenses Operating income (a) Prepare a revised income statement showing the segment margin for each division V v V V V Average Strong $449,000 $546,900 245,800 300,700 203,200 246,200 79,700 112,700 68.600 68.600 $54,900 $64,900 $ Weak S Average $ Strong $ Total
Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Dunn Company’s six divisions. Veronica made the following presentation to Dunn’s board of directors and suggested the Percy Division be eliminated. “If the Percy Division is eliminated,” she said, “our total profits would increase by $26,900.” The OtherFive Divisions PercyDivision Total Sales $1,665,000 $100,600 $1,765,600 Cost of goods sold 978,700 77,000 1,055,700 Gross profit 686,300 23,600 709,900 Operating expenses 527,200 50,500 577,700 Net income $159,100 $ (26,900 ) $132,200 In the Percy Division, cost of goods sold is $59,200 variable and $17,800 fixed, and operating expenses are $31,600 variable and $18,900 fixed. None of the Percy Division’s fixed costs will be eliminated if the division is discontinued.Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your…
The Custodial Division of Clark's Corporate Services (CCS) has assets of $1.2 million. During the past year, the division had profits of $228,000. CCS has a cost of capital of 7.5 percent. Ignore taxes. Required: a. Compute the divisional ROI for the Custodial Division. b. Compute the divisional RI for the Custodial Division. Complete this question by entering your answers in the tabs below. Required A Required B Compute the divisional ROI for the Custodial Division. Divisional ROI % Required A Required B >
Jan Shumard, president and general manager of Danbury Company, was concerned about thefuture of one of the company’s largest divisions. The division’s most recent quarterly incomestatement follows:Sales $3,751,500Less: Cost of goods sold 2,722,400Gross profit $1,029,100Less: Selling and administrative expenses 1,100,000Operating (loss) $ (70,900)Jan is giving serious consideration to shutting down the division because this is the ninth consecutive quarter that it has shown a loss. To help him in his decision, the following additionalinformation has been gathered:• The division produces one product at a selling price of $100 to outside parties. Thedivision sells 50% of its output to another division within the company for $83 per unit(full manufacturing cost plus 25%). The internal price is set by company policy. If thedivision is shut down, the user division will buy the part externally for $100 per unit.• The fixed overhead assigned per unit is $20.• There is no alternative use for…
Giardin Outdoors is a recreational goods retailer with two divisions: Online and Stores. The two divisions both use the services of the corporate Finance and Accounting (F and A) Department. Annual costs of the F and A Department total $5.245 million a year. Managers in the two operating divisions are measured based on division operating profits. The following selected data are available for the two operating divisions: Online Stores Required A Revenues ($000) Required: a. What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis? b. What is the F and A cost that is charged to each division if the the number of transactions is used as the allocation basis? $ 75,900 41,700 Complete this question by entering your answers in the tabs below. Division Online Stores Transactions (000) 1,516.5 508.5 Required B What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis? Note: Do not…
Eacher Wares is a division of a major corporation. The following data are for the latest year of operations: Sales $14,720,000 Net operating income $1,000,960 Average operating assets $4,000,000 The company’s minimum required rate of return 14% a. What is the division's margin?b. What is the division's turnover?c. What is the division's return on investment (ROI)?d. What is the division's residual income?
Eacher Wares is a division of a major corporation. The following data are for the latest year of operations: Sales Net operating income Average operating assets The company's minimum required rate of return $14,720,000 $1,000,960 $4,000,000 14% Required: a. What is the division's margin? b. What is the division's turnover? c. What is the division's return on investment (ROI)? d. What is the division's residual income?
Sharon Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Carla Vista Company's six divisions. Sharon made the following presentation to Carla Vista's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $25,300." The Other Five Divisions Percy Division Total Sales $1,663,000 $100,900 $1,763,900 Cost of goods sold 978,400 76,500 1,054,900 Gross profit 684,600 24,400 709,000 Operating expenses 528,500 49,700 578,200 Net income $156,100 $ (25,300) $130,800 In the Percy Division, cost of goods sold is $60,100 variable and $16,400 fixed, and operating expenses are $29,100 variable and $20,600 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Sharon right about eliminating the Percy Division? Prepare a schedule to support your answer. (Enter negative amounts using either a negative sign preceding…
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign. Round your percentage answers to nearest whole percent.) Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income A $ 9,300,000 $ 3,100,000 17% 15 % Company B $ 7,500,000 $ 315,000 $ 14 % 360,000 % $ 4,950,000 $ 1,980,000 $ % 15 % 99,000