Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900

Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter13: Emerging Topics In Managerial Accounting

Section: Chapter Questions

Problem 55P

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