2-Close or Retain a StoreSuperior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement ofthe company for the last quarter is given below:Superior Markets, Inc.Income StatementFor the Quarter Ended June 30NorthSouthEastDistrict$720,000403,200TotalDistrictDistrict$3,000,0001,657,200Sales$1,200,000$1,080,000Cost of goods sold660,000594,000Gross marginExpensesSelling expenses1,342,800316,800540,000486,000817,000383,000231,400106,000315,000150,900270,600Administrative126,100Total expenses1,200,000337,400465,900396,700Net income (loss)$142,800$ (20,600)$74,100$89,300The store located in the North District has consistently shown losses over the past two years. For this reason, management isconsidering to closed the store. The company has asked you to make a recommendation as to whether the store should beclosed or kept open. The following additional information is available for your use:a.The breakdown of the selling and administrative expenses is as follows:Selling expensesTotalNorthSouthEast$239,000187,00045,000$89,00072,00018,000$70,000$80,00064,00016,20095,000Sales salariesDirect advertisingGeneral advertising***Store rent51,00010,800300,00085,000120,000Depreciation6,0003,000Store FixturesDelivery equipmentDelivery salaries16,0009,00021,0004,6003,0007,0005,4003,0007,0007,000Total Selling expenses$817,000$231,400$315,000$270,600Total$70,00050,00025,000106,00057,000AdministrativeNorthSouthEastStore management salaries$30,00020,0009,00040,00021,90030,000$19,00018,0008,50035,00018,60027,000$21,00012,0007,500General office salaries ***Insurance on fixtures and inventoryUtilities31,000Employment taxesGeneral office - other***16,50075,00018,000Total administrative$383,000$106,000$150,900$126,100***Allocated on the basis of sales dollarsThe lease of the building housing the North store can be broken with no penalty.The fixtures being used in the North store would be transferred to the other two stores if the North store were closed.The general manager of the North store would be retained and transferred to another position in the company of theNorth store were closed. She would be filling a position that would otherwise be filed by hiring a new employee at asalary of $11,000 per quarter. The general manager of the North store would be retained at her normal salary of$12,000 per quarter. All other employees in the store would be discharged.The company has one delivery crew that serves all three stores. One delivery person could be discharged if the Northstore were closed. This persor's salary is $4,000 per quarter. The delivery equipment would be distributed to the otherstores. The equipment does not wear out through use, but does eventually become obsolete.The company's employment taxes are 15% of salaries.q. One-third of the insurance in the North store is on the store's fixtures.h. The General Office Salaries' and 'General Office- other relate to the overall management of Superior Markets Inc. Ifthe North store were closed, one person in the general office could be discharged because of the decrease in overallworkload. This person's compensation is 6,000 per quarter.b.C.d.e.f.Required:1. Prepare a schedule showing the change in revenues and expenses and the impact on the company's overall netoperating income that would result if the North store were closed.2. Assuming that the store can't be subleased, what recommendation would you make to the management of SuperiorMarkets, Inc.?3. Disregard requirement 2. Assume that if the North store were closed, at least one-fourth of its sales would transfer tothe East store due to strong customer loyalty to Superior Markets. The East store has enough capacity to handle theincreased sales. You may assume that the increased sales in the East store would yield the same gross margin as apercentage of sales as present sales in that store. What effect would these factors have on your recommendationconcerning the North store?4. Show all computations to support your answer.

Answer 1) Particulars Amount Amount Gross Margin lost if the store is closed $(316,800)…

perior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement of = company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended June 30 North South East District $720,000 403,200 Total District $1,200,000 660,000 District Sales Cost of goods sold $3,000,000 1,657,200 $1,080,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000

perior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement of = company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended June 30 North South East District $720,000 403,200 Total District $1,200,000 660,000 District Sales Cost of goods sold $3,000,000 1,657,200 $1,080,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000

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

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 11MCQ: Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett...

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Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by 300,000. b. Overall operating income will increase by 2,600. c. Overall operating income will decrease by 25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by 27,600.
Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Superior Markets, IncorporatedIncome StatementFor the Quarter Ended September 30 Total North Store South Store East Store Sales $ 3,000,000 $ 720,000 $ 1,200,000 $ 1,080,000 Cost of goods sold 1,657,200 403,200 660,000 594,000 Gross margin 1,342,800 316,800 540,000 486,000 Selling and administrative expenses: Selling expenses 817,000 231,400 315,000 270,600 Administrative expenses 383,000 106,000 150,900 126,100 Total expenses 1,200,000 337,400 465,900 396,700 Net operating income (loss) $ 142,800 $ (20,600) $ 74,100 $ 89,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept…
Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Superior Markets, IncorporatedIncome StatementFor the Quarter Ended September 30 Total North Store South Store East Store Sales $ 4,200,000 $ 1,008,000 $ 1,680,000 $ 1,512,000 Cost of goods sold 2,320,080 564,480 924,000 831,600 Gross margin 1,879,920 443,520 756,000 680,400 Selling and administrative expenses: Selling expenses 1,143,800 323,960 441,000 378,840 Administrative expenses 536,200 148,400 211,260 176,540 Total expenses 1,680,000 472,360 652,260 555,380 Net operating income (loss) $ 199,920 $ (28,840) $ 103,740 $ 125,020 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or…
Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Superior Markets, Inc.Income StatementFor the Quarter Ended September 30 Total NorthStore SouthStore EastStore Sales $ 4,600,000 $ 920,000 $ 1,840,000 $ 1,840,000 Cost of goods sold 2,530,000 565,000 953,000 1,012,000 Gross margin 2,070,000 355,000 887,000 828,000 Selling and administrative expenses: Selling expenses 849,000 247,400 323,000 278,600 Administrative expenses 463,000 122,000 174,900 166,100 Total expenses 1,312,000 369,400 497,900 444,700 Net operating income (loss) $ 758,000 $ (14,400 ) $ 389,100 $ 383,300 The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store.…
Buckley Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. BUCKLEY COMPANY Income Statements for Year 2 Segment A B C Sales $ 330,000 $ 480,000 $ 500,000 Cost of goods sold (242,000 ) (184,000 ) (190,000 ) Sales commissions (30,000 ) (44,000 ) (44,000 ) Contribution margin 58,000 252,000 266,000 General fixed operating expenses (allocation of president’s salary) (92,000 ) (92,000 ) (92,000 ) Advertising expense (specific to individual divisions) (6,000 ) (20,000 ) 0 Net income (loss) $ (40,000 ) $ 140,000 $ 174,000 Required Prepare a schedule of relevant sales and costs for Segment A. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A. Options for required A table are: Advertising…
Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the company’s performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented statement is given below. This statement is for May, the most recent month of activity. Sales Region West Central East Sales $ 311,000 $ 803,000 $ 699,000 Regional expenses (traceable): Cost of goods sold 95,000 243,000 317,000 Advertising 103,000 244,000 235,000 Salaries 52,000 51,000 107,000 Utilities 8,800 15,600 14,400 Depreciation 25,000 31,000 27,000 Shipping expense 12,000 29,000 39,000 Total regional expenses 295,800 613,600 739,400 Regional income (loss) before corporate expenses 15,200 189,400 (40,400 )…
Forchen, Inc., provided the following information for two of its divisions for last year: Small AppliancesDivision Cleaning ProductsDivision Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Required: 1. For the Small Appliances Division, Calculate: A. Average operating assets B. Margin C. Turnover D. ROI
Forchen, Inc., provided the following information for two of its divisions for last year: Small AppliancesDivision Cleaning ProductsDivision Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Required: 1. For the Small Appliances Division, Calculate: A. Average operating assets B. Margin C. Turnover D. ROI 2. For the Cleaning Products Division, calculate: A. Average operating assets B. Margin C. Turnover D. ROI 3. What if operating income for the small appliances division was $2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).
Adams Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. ADAMS COMPANY Income Statements for Year 2 Segment A B C Sales $ 166,000 $ 250,000 $ 265,000 Cost of goods sold (126,000 ) (79,000 ) (77,000 ) Sales commissions (22,000 ) (23,000 ) (32,000 ) Contribution margin 18,000 148,000 156,000 General fixed operating expenses (allocation of president’s salary) (39,000 ) (50,000 ) (25,000 ) Advertising expense (specific to individual divisions) (5,000 ) (15,000 ) 0 Net income (loss) $ (26,000 ) $ 83,000 $ 131,000 Required Prepare a schedule of relevant sales and costs for Segment A. Prepare comparative income statements for the company as a whole under two alternatives: (1) the retention of Segment A and (2) the elimination of Segment A.
Forchen, Inc., provided the following information for two of its divisions for last year: Small AppliancesDivision Cleaning ProductsDivision Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Required: 2. For the Cleaning Products Division, calculate: A. Average operating assets B. Margin C. Turnover D. ROI
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: TotalCompany Commercial Residential Sales $ 975,000 $ 325,000 $ 650,000 Cost of goods sold 663,000 182,000 481,000 Gross margin 312,000 143,000 169,000 Selling and administrative expenses 300,000 134,000 166,000 Net operating income $ 12,000 $ 9,000 $ 3,000 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 $64,500 of common fixed expenses that would continue to be incurred even if the Commercial…
Forchen, Inc., provided the following information for two of its divisions for last year: Small AppliancesDivision Cleaning ProductsDivision Sales $34,670,000 $31,320,000 Operating income 2,773,600 1,252,800 Operating assets, January 1 6,394,000 5,600,000 Operating assets, December 31 7,474,000 6,000,000 Required: 3. What if operating income for the small appliances division was $2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).