I am resubmitting this question as it was not fully answered and it did not have the correct answers. Please help with the correct information. Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below: Total Company Commercial Residential Sales $ 930,000 $ 310,000 $ 620,000 Cost of goods sold 623,100 170,500 452,600 Gross margin 306,900 139,500 167,400 Selling and administrative expenses 288,000 128,000 160,000 Net operating income $ 18,900 $ 11,500 $ 7,400 In preparing these statements, the intern determined that Toxaway’s only variable selling and administrative expense is a 10% sales commission on all sales. The company’s total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped. Required: 1. Do you agree with the intern’s decision to use an absorption format for her segmented income statement? Yes No 2-a. Based on the intern’s segmented income statement, can you determine how she allocated the company’s common fixed expenses to the Commercial and Residential segments? Commercial Residential Common fixed expenses 2-b. Do you agree with her decision to allocate the common fixed expenses to the Commercial and Residential segments? Yes No 3. Redo the intern’s segmented income statement using the contribution format. Toxaway Company Variable Costing Income Statement Total Company Commercial Residential $ $ $ Variable expenses: Total variable expenses $ $ $ 4. Compute the companywide break-even point in dollar sales. (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount. Do not consider the CM ratio in percentages.) Break-even point in dollar sales 5. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.) Commercial Division Residential Division Break-even point in dollar sales 6. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $23,000 and $46,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.) Commercial Division Residential Division Break-even point in dollar sales
I am resubmitting this question as it was not fully answered and it did not have the correct answers. Please help with the correct information.
Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below:
| Total Company | Commercial | Residential | |||||||
| Sales | $ | 930,000 | $ | 310,000 | $ | 620,000 | |||
| Cost of goods sold | 623,100 | 170,500 | 452,600 | ||||||
| Gross margin | 306,900 | 139,500 | 167,400 | ||||||
| Selling and administrative expenses | 288,000 | 128,000 | 160,000 | ||||||
| Net operating income | $ | 18,900 | $ | 11,500 | $ | 7,400 | |||
In preparing these statements, the intern determined that Toxaway’s only variable selling and administrative expense is a 10% sales commission on all sales. The company’s total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped.
Required:
1. Do you agree with the intern’s decision to use an absorption format for her segmented income statement?
| Yes | |
| No |
2-a. Based on the intern’s segmented income statement, can you determine how she allocated the company’s common fixed expenses to the Commercial and Residential segments?
|
2-b. Do you agree with her decision to allocate the common fixed expenses to the Commercial and Residential segments?
| Yes | |
| No |
3. Redo the intern’s segmented income statement using the contribution format.
|
4. Compute the companywide break-even point in dollar sales. (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)
|
5. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)
|
6. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $23,000 and $46,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)
|
Trending now
This is a popular solution!
Step by step
Solved in 10 steps with 8 images
