The managing director of Onyx Garages Ltd is concerned about the profitability of the business. She asked for cost details of the three divisions of the business - repairs, petrol sales, and spare parts together with a breakdown of sales revenue. Unaware of the differences between costing approaches, she asked for overheads to be apportioned on full-cost principles according to labor cost. The following data were provided. When the managing director saw these details, she said, 'If we close down our repair division, then total annual profits will rise - they would have been $15,000 higher last year if we had shut down repairs in 2008.' Overall profit made by the business in 2009 (55,000 + 6,000)- 15,000 = $46,000. As a trainee accountant working with this company, you have been asked for your opinion on the figures.

The managing director of Onyx Garages Ltd is concerned about the profitability of the business. She asked for cost details of the three divisions of the business - repairs, petrol sales, and spare parts together with a breakdown of sales revenue. Unaware of the differences between costing approaches, she asked for overheads to be apportioned on full-cost principles according to labor cost. The following data were provided. When the managing director saw these details, she said, 'If we close down our repair division, then total annual profits will rise - they would have been $15,000 higher last year if we had shut down repairs in 2008.' Overall profit made by the business in 2009 (55,000 + 6,000)- 15,000 = $46,000. As a trainee accountant working with this company, you have been asked for your opinion on the figures.

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

Chapter1: Introduction To Managerial Accounting

Section: Chapter Questions

Problem 14E: The following describes the job responsibilities of two employees of Barney Manufacturing. Joan...

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