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Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? 135,150 ✓ For the plank line? 63,900 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✔ by $ 10,000 X

Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? 135,150 ✓ For the plank line? 63,900 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✔ by $ 10,000 X

Managerial Accounting: The Cornerstone of Business Decision-Making
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 44E
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Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? $ 135,150 ✔ For the plank line? 63,900 ✔ 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✓by $ 10,000 X
Transcribed Image Text:Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? $ 135,150 ✔ For the plank line? 63,900 ✔ 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✓by $ 10,000 X
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