Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. ZACHARY TRANSPORT COMPANY West Division Income Statement for Year 3 $ 690,000 (540,000) (69,000) (89,000) (59,000) (149,000) $(216,000) Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs Net loss Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase its revenue to $780,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $780,000? c. What is the minimurn amount of revenue required to justify continuing the operation of West Division?

Zachary Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. ZACHARY TRANSPORT COMPANY West Division Income Statement for Year 3 $ 690,000 (540,000) (69,000) (89,000) (59,000) (149,000) $(216,000) Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs Net loss Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase its revenue to $780,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $780,000? c. What is the minimurn amount of revenue required to justify continuing the operation of West Division?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.9E: Profit center responsibility reporting On-Demand Sports Co. operates two divisions—the Action Sports...

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Service department charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of 64,560, and the Purchasing Department had expenses of 40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: A. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. B. Using the cost driver information in (A), determine the annual amount of payroll and purchasing costs allocated to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. C. Why does the Residential Division have a larger support department allocation than the other two divisions, even though its sales are lower?
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Vernon transport company divides its operations into four divisions. A recent statement for its West Division folows Vernon Transport Comapny Wesy division Income Statement for year 3 Revenue $670,000 Salaries for drivers (520,000) Fuel expenses (67,000) Insurance (87,000) Division-level facility- sustaining costs (57,000) Companywide facility-sustaining costs (147,000) Net loss $208,000 Required a) By how much would cormpanywide income increase or decrease if West Division is estimated? Should West Division be eliminated? b) assume that West Division is able to increase its revenue to $760,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segemnt were eliminated. Should West Division be eliminated if revenue were $760,000? c) What is the mininum amount of revenue required to Jusify continuing the operation of West Divison? Complete this question by entering your answer in the table below. Income Would…
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GREEN COMPANY has two divisions: Del Sur Division and Del Norte Division. The following data are for the most recent operating period: Total Company Del Sur Division Del Norte DivisionSales P 418,000 P 193,000 P 225,000 Variable expenses P 130,880 P 79,130 P 51,750 Traceable fixed expenses P 186,000 P 77,000 P 109,000 Common fixed expense P 79,420 P 36,670 P 42,750 The bookkeeper allocated common fixed expenses to the divisions on the basis of sales. Required: a. What is the company's overall break-even sales? b. Determine the break-even point for Del Sur Division c. Determine the break-even point for Del Norte Division.
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