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Concept explainers
(1)
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
To Prepare: The contribution margin by state report for Company TS.
(2)
The additional profit for each state, if the sales amount increased by 20% and decrease in advertising expenses.
(3)
To Identify: Which state will provide the greatest profit return for a $42,200 increasing in advertising expenses?
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Chapter 20 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- 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…arrow_forwardTerritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $350 $250 Variable cost of goods sold per unit (130) (115) Manufacturing margin per unit $220 $135 Variable selling expense per unit (157) (70) Contribution margin per unit $63 $65 The sales unit volume for the territories and products for the period is as follows: East Coast West coast Atlantic Wave 2,780 1,390 Pacific Pounder 0 1390arrow_forwardCullumber Markets imports and sells small bear-shaped piñatas. In planning for the coming year, the company’s owner is evaluating several scenarios. For each scenario under consideration, prepare a contribution margin income statement showing the anticipated operating income. Consider each scenario is applied independently to the original data. Last year’s income statement is as follows: Total Per Unit Sales revenue $756,000 $21.00 Variable expenses 324,000 9.00 Contribution margin 432,000 $12.00 Fixed expenses 175,000 Operating income $257,000 (a) The sales price increases by 10% and sales volume decreases by 6%. (Round per unit answers to 2 decimal places, e.g. 0.38.) Cullumber MarketsIncome Statement Total Per Unit Sales $enter a dollar amount $enter a dollar amount rounded to 2 decimal places Variable expenses enter a dollar…arrow_forward
- Patterson Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. PATTERSON COMPANY Income Statements for the Year 2014 Segment Sales A В C $162,000 $242,000 $263,000 (84,000) (30,000) (80,000) (31,000) Cost of goods sold Sales commissions (128,000) (18,000) Contribution margin General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual divisions) 16,000 128,000 152,000 (35,000) (39,000) (33,000) (3,000) (15,000) (26,000) $ 78,000 119,000 Net income Required: a. Prepare a schedule of relevant sales and costs for Segment A. Relevant Rev. and Cost items for Segment A Effect on income b. 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 PATTERSON COMPANY Comparative Income Statements for the Year 2014 Eliminate Seg. A Keep Seg. A Decision Sales Cost of…arrow_forwardTerritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $350 $250 Variable cost of goods sold per unit (130) (118) Manufacturing margin per unit $220 $132 Variable selling expense per unit (157) (67) Contribution margin per unit $63 $65 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 2,460 1,230 Pacific Pounder 0 1,230 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc. Contribution Margin by Territory East…arrow_forwardTerritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $200 $120 Variable cost of goods sold per unit (150) (90) Manufacturing margin per unit $50 $30 Variable selling expense per unit (34) (16) Contribution margin per unit $16 $14 The sales unit volume for the sales territories and products for the period is as follows: East Coast West Coast Atlantic Wave 40,000 25,000 Pacific Pounder 0 25,000 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc.Contribution Margin by Territory East Coast West…arrow_forward
- 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.arrow_forwardTerritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $450 $400 Variable cost of goods sold per unit (167) (196) Manufacturing margin per unit $283 $204 Variable selling expense per unit (202) (92) Contribution margin per unit $81 $112 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 3,600 1,800 Pacific Pounder 1,800 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc. Contribution Margin by Territoryarrow_forwardTerritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $350 $300 Variable cost of goods sold per unit (130) (147) Manufacturing margin per unit $220 $153 Variable selling expense per unit (143) (69) Contribution margin per unit $77 $84 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 3,200 1,600 Pacific Pounder 0 1,600 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc.Contribution Margin by Territoryarrow_forward
- Fence Industries is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $15,000 for sales support should be assigned to the individual customers from the information given as follows: Multiple Choice Units purchased Purchase orders (annually) What is the amount of the sales support costs that should be allocated to Customer B, assuming Fence uses purchases orders to compute activity-based costs? $3,000 $6,000 $9,000 Customer A 200,000 $12,000 Customer B 300,000 32 8arrow_forwardPatterson Company operates three segments. Income statements for the segments imply that profitability could be improved if Segment A were eliminated. PATTERSON COMPANY Income Statements for the Year 2014 Segment Sales Cost of goods sold А В C $164,000 $250,000 $245,000 (84,000) (29,000) |(130,000) (18,000) (80,000) (22,000) Sales commissions Contribution margin 143,000 16,000 137,000 General fixed oper. exp. (allocation of president's salary) Advertising expense (specific to individual divisions) (37,000) (32,000) (34,000) (5,000) (11,000) 0 (26,000) $ 94,000 $ 109,000 Net income Required: a. Prepare a schedule of relevant sales and costs for Segment A. Relevant Rev. and Cost items for Segment A Effect on income b. 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. PATTERSON COMPANY Comparative Income Statements for the Year 2014 Eliminate Seg. A Decision Keep Seg. A Sales Cost…arrow_forwardCost Classification, Income Statement Gateway Construction Company, run by Jack Gateway, employs 25 to 30 people as subcontractors for laying gas, water, and sewage pipelines. Most of Gateways work comes from contracts with city and state agencies in Nebraska. The companys sales volume averages 3 million, and profits vary between 0 and 10% of sales. Sales and profits have been somewhat below average for the past 3 years due to a recession and intense competition. Because of this competition, Jack constantly reviews the prices that other companies bid for jobs. When a bid is lost, he analyzes the reasons for the differences between his bid and that of his competitors and uses this information to increase the competitiveness of future bids. Jack believes that Gateways current accounting system is deficient. Currently, all expenses are simply deducted from revenues to arrive at operating income. No effort is made to distinguish among the costs of laying pipe, obtaining contracts, and administering the company. Yet all bids are based on the costs of laying pipe. With these thoughts in mind, Jack looked more carefully at the income statement for the previous year (see below). First, he noted that jobs were priced on the basis of equipment hours, with an average price of 165 per equipment hour. However, when it came to classifying and assigning costs, he needed some help. One thing that really puzzled him was how to classify his own 114,000 salary. About half of his time was spent in bidding and securing contracts, and the other half was spent in general administrative matters. Required: 1. Classify the costs in the income statement as (1) costs of laying pipe (production costs), (2) costs of securing contracts (selling costs), or (3) costs of general administration. For production costs, identify direct materials, direct labor, and overhead costs. The company never has significant work in process (most jobs are started and completed within a day). 2. Assume that a significant driver is equipment hours. Identify the expenses that would likely be traced to jobs using this driver. Explain why you feel these costs are traceable using equipment hours. What is the cost per equipment hour for these traceable costs?arrow_forward
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