Segmented Income Statement L07—4
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recentmonthly contribution format income statement:
In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, theAccounting Department has developed the following information:
Required:
1. Prepare a contribution format income statement segmented by divisions.
2. The Marketing Department has proposed increasing the West Division’s monthly advertising by $1 5:000 based on the belief that it wouldincrease that division’s sales by 20%. Assuming these estimates are accurate, how much would the Company’s net operating incomeincrease (decrease) if the proposal is implemented?
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Introduction To Managerial Accounting
- Effect of proposals on divisional performance A condensed income statement for the Jet Ski Division of Amazing Rides Inc. for the year ended December 31. 20Y2, is as follows Assume that the Jet Ski Division received no charges from service departments. The president of Amazing Rides has indicated that the division's rate of return on a $15,000,000 investment must be increased to at least 12% by the end of the next year if operations are to continue. The division manager is considering the following three proposals Proposal 1: Transfer equipment with a book value of J3.000.000 to other divisions at no gain or loss and lease similar equipment. The annual lease payments would exceed the amount of depreciation expense on the old equipment by $264,000. This increase in expense would be included as part of the cost of goods sold. Sales would remain unchanged. Proposal 2: Purchase new and more efficient machining equipment and thereby reduce the cost of goods sold by $480,000. Sales would remain unchanged, and the old equipment, which has no remaining book value, would be scrapped at no gain or loss. The new equipment would increase invested assets by an additional $1,000,000 for the year. Proposal 5? Reduce invested assets by discontinuing the tandem jet ski line. This action would eliminate sales of $2,280,000, cost of goods sold of $1,400,000, and operating expenses of $463,600. Assets of $4,200,000 would be transferred to other divisions at no gain or loss. Instructions Which of the three proposals would meet the required 12% return on investment?'arrow_forwardSegmented Income Statements: Analysis of Proposals to Improve Profits Shannon, Inc., has two divisions. One produces and sells paper party supplies (napkins, paper plates, invitations); the other produces and sells cookware. A segmented income statement for the most recent quarter is given below: Party Supplies Division Cookware Division Total Sales $500,000 $750,000 $1,250,000 Less: Variable expenses 425,000 460,000 885,000 Contribution margin $ 75,000 $290,000 $ 365,000 Less: Direct fixed expenses 85,000 110,000 195,000 Segment margin $ (10,000) $180,000 $ 170,000 Less: Common fixed expenses 130,000 Operating income $ 40,000 On seeing the quarterly statement, Madge Shannon, president of Shannon, Inc., was distressed and discussed her disappointment with Bob Ferguson, the company's vice president of finance. MADGE: "The Party Supplies Division is…arrow_forward1 ) Retail Division = ( 1125 / 2500 ) x 264000 = 118800 commercial division = ( 1375 / 2500 ) x 264000 = $ 145200 Using the data for Lee Company above along with the following data, determine the divisional income from operations for the Division and the Commercial Division:arrow_forward
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- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning