Exercise 7-14 The L Cellar sells wine and operates a small sandwich deli. Туріcal monthly operating data is shown below: Total Wine Deli P78,000 31,000 P47,000 18,000 P29,000 15,000 P14,000 P8,000 P70,000 28,000 P42,000 12,000 Sales Variable costs (including cost of sales) Contribution margin Fixed costs traceable to departments Departmental segment margins Common fixed costs Income from operations 3,000 P5,000 6,000 P30,000 P(1,000) Lala, owner of L Cellar, is considering closing the deli and renting the floor space to a film developing business for P2,400 per month. However, Lala, has read in the trade journal that without a deli, wine sales should be expected to decline by 10%. Also, the fixed cost traceable to the deli included P2,200 in monthly salary to a part-time employee that Lala will retain even if she closes the deli. REQUIRED: 1. Prepare a comparative income statement (to continue with deli, and to discontinue with deli), to help Lala arrive at a decision regarding deli. 2. Using the segment CM approach, what is your recommendation regarding deli? How does it compare with the answer in no. 1?

Exercise 7-14 The L Cellar sells wine and operates a small sandwich deli. Туріcal monthly operating data is shown below: Total Wine Deli P78,000 31,000 P47,000 18,000 P29,000 15,000 P14,000 P8,000 P70,000 28,000 P42,000 12,000 Sales Variable costs (including cost of sales) Contribution margin Fixed costs traceable to departments Departmental segment margins Common fixed costs Income from operations 3,000 P5,000 6,000 P30,000 P(1,000) Lala, owner of L Cellar, is considering closing the deli and renting the floor space to a film developing business for P2,400 per month. However, Lala, has read in the trade journal that without a deli, wine sales should be expected to decline by 10%. Also, the fixed cost traceable to the deli included P2,200 in monthly salary to a part-time employee that Lala will retain even if she closes the deli. REQUIRED: 1. Prepare a comparative income statement (to continue with deli, and to discontinue with deli), to help Lala arrive at a decision regarding deli. 2. Using the segment CM approach, what is your recommendation regarding deli? How does it compare with the answer in no. 1?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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