Please help ASAP, Thank You! Sales MarketHandbagsDomesticForeignRRTraceable fixed expenses:RRCommon fixed expenses:Total common fixed expensesRequired:1. Prepare a contribution format segmented income statement for the Leather Division,with segments defined as product lines.Product LineLeatherGarmentsShoesHandbagsDivisionSalesRRRRTraceable fixed expenses:Total traceable fixed expensesRRRCommon fixed expenses:R2. Management is surprised by the handbag product line's poor showing and would liketo have the product line segmented by market. The following information is availableabout the markets in which the handbag line is sold:Handbag MarketsDomesticForeignR70,000SalesTraceable fixed expenses:R300,000AdvertisingVariable expenses as a percentageof salesR 55,000R47,00048%85%All of the handbag product line's selling and administrative expenses and depreciation are common tothe markets in which the product is sold. Prepare a contribution format segmented income statementfor the handbag product line with segments defined as markets.3. Refer to the statement prepared in (1) above. The sales manager wants to run aspecial promotional campaign on one of the product lines over the next month. Amarketing study indicates that such a campaign would increase sales of the Garmentsproduct line by R215,000 or sales of the shoes product line by R160,000. Thecampaign would cost R30,000.a. Compute the increased operating income for these product lines for the expectedincreased sales.GarmentsShoesIncreased operating incomeb. Based on the above results, which product line should be chosen?O ShoesO Garments Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company'scontribution format segmented income statement (in terms of the Brazilian currency, thereal, R) for last month is given below:DivisionsTotalCompanyR 4,420,000 R 2,600,000 R1,820,0002,103,500ClothLeatherSalesVariable expenses1,110,000993,500Contribution margin2,316,5001,490,000826,500Traceable fixedexpenses:AdvertisingSelling andadministrative708,000450,000258,000592,000360,000232,000Depreciation259,000130,000129,000Total traceable fixed1,559,000940,000619,000expensesDivisional segmentmargin757,500R550,000 R 207,500Common fixed expenses405,000Operating incomeR 352,500Top management can't understand why the Leather Division has such a low segmentmargin when its sales are only 30% less than sales in the Cloth Division. As one step inisolating the problem, management has directed that the Leather Division be furthersegmented into product lines. The following information is available on the product linesin the Leather Division:Leather Division Product LinesGarmentsShoesHandbagsR370,000SalesR650,000R800,000Traceable fixed expenses:AdvertisingSelling and administrativeDepreciationVariable expenses as aR 70,000R 45,000R 34,000R 86,000R 50,000R 71,000R102,000R 69,000R 24,00060%50%55%percentage of salesAnalysis shows that R68,000 of the Leather Division's selling and administrativeexpenses are common to the product lines.

Contribution is the difference between sales revenue and variable expenses.

Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Divisions Total Cloth Company R 4,420,000 2,103,500 Leather R 2,600,000 1,110,000 Sales R 1,820,000 993,500 Variable expenses Contribution margin 2,316,500 1,490,000 826,500 Traceable fixed expenses: Advertising Selling and administrative 708,000 450,000 258,000 592,000 360,000 232,000 Depreciation 259,000 130,000 129,000 Total traceable fixed 1,559,000 940,000 619,000 expenses Divisional segment margin 757,500 R 550,000 R 207,500 Common fixed expenses 405,000 Operating income R 352,500 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: Leather Division Product Lines Garments Shoes Handbags R370,000 Sales R650,000 R800,000 Traceable fixed expenses: Advertising Selling and administrative Depreciation Variable expenses as a R 70,000 R 45,000 R 34,000 R 86,000 R 50,000 R 71,000 R102,000 R 69,000 R 24,000 60% 50% 55% percentage of sales Analysis shows that R68,000 of the Leather Division's selling and administrative expenses are common to the product lines.

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 1MAD