Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 7E
To determine
The contribution margin statement is prepared by deducting all the variable cost form sales revenue of each segment to arrive at the amount of contribution earned. Then the traceable fixed expense are deducted for computing the segment income and untraceable fixed cost shall be deducted form income of the company as a whole for coming at the amount of net income earned.
The Contribution margin Income Statement for different segment and for company as a whole under Variable costing.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q6 The HASF Ink Ltd income statement for the preceding year is presented below except as noted the cost / revenue relationship for the coming year is expected to follow the same pattern as in the preceding year income statement for the year ending March 31 is as follow s
Sales (200,000 units @ 2.5 Each) Rs. 5, 00,000
Variable cost 3, 00,000
Contribution margin 2, 00,000
Less Fixed cost 100,000
Profit before tax 100,000
Less tax 35,000
Profit after tax 65,000
Required
At what level of sales will the company be able to maintain its present pre- tax profit position even after expansion?
Q5. Beck Inc. and Bryant Inc. have the following operating data:
Beck Inc.
Bryant Inc.
Sales
$330,700
$1,056,000
Variable costs
(132,700)
(633,600)
Contribution margin
$198,000
$422,400
Fixed costs
(132,000)
(246,400)
Operating income
$66,000
$176,000
a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.
Beck Inc.
Bryant Inc.
b. How much would operating income increase for each company if the sales of each increased by 20%? If required, round answers to nearest whole number.
Dollars
Percentage
Beck Inc.
$
%
Bryant Inc.
$
%
c. The difference in the _________ of operating income is due to the difference in the operating leverages. Beck Inc.'s __________ operating leverage means that its fixed costs are a __________ percentage of contribution margin than are Bryant Inc.'s.
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below:
Total Company
East
West
Sales
$ 915,000
$ 610,000
$ 305,000
Variable expenses
732,000
518,500
213,500
Contribution margin
183,000
91,500
91,500
Traceable fixed expenses
111,000
51,000
60,000
Segment margin
72,000
$ 40,500
$ 31,500
Common fixed expenses
60,000
Net operating income
$ 12,000
Required:
1. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement?
2. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Chapter 7 Solutions
Introduction To Managerial Accounting
Ch. 7 - What is the difference between absorption costing...Ch. 7 - Are selling and administrative expenses treated as...Ch. 7 - Explain how fixed manufacturing overhead costs are...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - Prob. 6QCh. 7 - If the units produced exceed the units sold, which...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - How does Lean Production reduce or eliminate the...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Distinguish between a traceable fixed cost and a...Ch. 7 - Explain how the contribution margin differs from...Ch. 7 - Why aren’t common fixed costs allocated to...Ch. 7 - How is it possible for a fixed cost that ¡s...Ch. 7 - Should a company allocate its common fixed costs...Ch. 7 - Prob. 1AECh. 7 - Prob. 2AECh. 7 - Prob. 3AECh. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 2F15Ch. 7 - Prob. 3F15Ch. 7 - Prob. 4F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 6F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 8F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 10F15Ch. 7 - Prob. 11F15Ch. 7 - Prob. 12F15Ch. 7 - Prob. 13F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 1ECh. 7 - Variable Costing Income Statement; Explanation of...Ch. 7 - Reconciliation of Absorption and Variable Costing...Ch. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Deducing Changes ¡n Inventories LO7—3 Parker...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Prob. 10ECh. 7 - Segmented Income Statement L07—4 Wingate Company,...Ch. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Variable Costing Unit Product Cost and Income...Ch. 7 - Absorption Costing Unit Product Cost and Income...Ch. 7 - Working with a Segmented Income Statement;...Ch. 7 - Prob. 17ECh. 7 - Prob. 18PCh. 7 - Variable Costing Income Statement; Reconciliation...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Segment Reporting and Decision-Making L07—4 Vulcan...Ch. 7 - Prob. 22PCh. 7 - Absorption and Variable Costing; Production...Ch. 7 - Companywide and Segment Break-Even Analysis;...Ch. 7 - Prepare and Interpret Income Statements; Changes...Ch. 7 - Prob. 26PCh. 7 - Variable and Absorption Costing Unit Product Costs...
Knowledge Booster
Similar questions
- 8.45 Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $300 $1,765 Less: Variable expenses 1,115 45 240 1,400 Contribution margin $165 $140 $60 $365 Less direct fixed expenses: Depreciation 50 15 10 75 Salaries 95 85 76 256 Segment margin $20 $40 $(26) $34 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that, each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Assume that 20% of the Alanson customers choose to buy from Petoskey because it offers a full range of products, including Conway. If Conway were no longer available from Petoskey,…arrow_forward13. Micky2, Inc. sells two products X and Y. Data concerning the company for July follow: Product X: sales - P200,000; variable expense - P50,000; and traceable fixed expenses - P80,000. For Product Y: sales - P300,000, variable expenses - P100,000 and traceable fixed expenses - P150,000. In addition there were common fixed expenses of P70,000 in July. What was the segment margin for Product X? P70,000 P38,000 P120,000 P150,000arrow_forwardch7-50 Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $ 12,150,000 Total variable cost 7,533,000 Contribution margin $ 4,617,000 Total fixed cost 2,875,878 Operating income $ 1,741,122 Required: 1(a). Compute variable cost per unit. Enter your answer to the nearest cent.$per unit 1(b). Compute contribution margin per unit. Enter your answer to the nearest cent.$per unit 1(c). Compute contribution margin ratio. % 1(d). Compute break-even point in units. units 1(e). Compute break-even point in sales dollars.$ 2. How many units must be sold to earn operating income of $376,542? units 3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected.$ 4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars. Margin of safety in units units Margin of safety in sales dollars $ 5. Compute the degree…arrow_forward
- Ma2. Q4 Bundoora Enterprises operates a single-product entity. Data relating to the product for 2020 were as follows: Annual Volume 45,000 Units Selling price per unit $65 Variable manufacturing cost per unit $25 Annual fixed manufacturing costs $155,000 Variable marketing and distribution costs per unit $15 Annual fixed non-manufacturing costs $445,000 a) Calculate and interpret the break-even in units for 2020. b) Calculate and interpret the margin of safety in both units and sales dollars. c) Calculate and interpret the profit achieved in 2020.d) Changes in marketing strategy are planned for 2021. This would increase variable marketing and distribution costs by $15 per unit and reduce fixed non-manufacturing costs by $100,000 per year. Calculate and interpret the units that would need to be sold in 2021 to achieve the same profit as in 2020.arrow_forwardCrossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 910,000 $ 650,000 $ 260,000 Variable expenses 637,000 468,000 169,000 Contribution margin 273,000 182,000 91,000 Traceable fixed expenses 133,000 70,000 63,000 Segment margin 140,000 $ 112,000 $ 28,000 Common fixed expenses 56,000 Net operating income $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that…arrow_forwardPiedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 825,000 $ 550,000 $ 275,000 Variable expenses 495,000 385,000 110,000 Contribution margin 330,000 165,000 165,000 Traceable fixed expenses 156,000 78,000 78,000 Segment margin 174,000 $ 87,000 $ 87,000 Common fixed expenses 69,000 Net operating income $ 105,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region. (For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.) 1. Dollar sales for company to break-even 2. Dollar sales for North…arrow_forward
- Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 900,000 $ 600,000 $ 300,000 Variable expenses 675,000 480,000 195,000 Contribution margin 225,000 120,000 105,000 Traceable fixed expenses 141,000 50,000 91,000 Segment margin 84,000 $ 70,000 $ 14,000 Common fixed expenses 59,000 Net operating income $ 25,000 Required: 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?arrow_forwardQ1 BrightTech Ltd has two Divisions that manufacture and sell agricultural products: Lawn and Tree Divisions. The following historical cost accounting data relate to Lawn and Tree Divisions for the year 2020: Lawn Tree Revenues 2,200,000 1,000,000 Variable costs 520,000 240,000 Fixed costs (excluding depreciation) 300,000 280,000 Plant depreciation 250,000 70,000 Operating income 1,130,000 410,000 Divisional assets (at Gross Book Value) 1,800,000 600,000 Accumulated depreciation (350,000) (160,000) Divisional assets (at Net Book Value) 1,450,000 440,000 BrightTech's CEO has $400,000 available to invest in one project in either Lawn or Tree Division. The expected operating income for this investment is $115,000 in 2021. The company's required return on investment is 25%. Required: (a) Calculate the ROI of each…arrow_forwardSegmented Income Statement Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $500,000, 46%, and $10,000, respectively. The North Division’s contribution margin and contribution margin ratio are $150,000 and 50%, respectively. The South Division’s segment margin is $30,000. The company has $90,000 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales.arrow_forward
- Q4. Division A of Kern Co. has sales of $350,000, cost of goods sold for $200,000, operating expenses of $30,000, and invested assets of $600,000. What is the return on investment for Division A? Answer: $______________ Explain your answer: __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________arrow_forward3 Revenue ($000)Latin America division............................... $ 75,000Total Global Electronics revenue..................... $600,000Fixed corporate costs ($000)......................... $ 18,000Variable cost as a percentage of revenue.............2.5% a. Fixed corporate costs are allocated on the basis of relative revenue. What is the target corporate cost for the Latin America division? b. Suppose that actual Latin America division revenues next year are $80 million, actual corporate revenues are $800 million, and actual corporate costs are $35,000 million. Compare the corporate costs that would have been allocated under the old method at Global Electronics and under the dual rate method.arrow_forward21. The following information pertains to the Chicken Wings Company and its divisions for the year ended December 31, 2020: • Sales to unaffiliated customers- P10,000,000 • Inter-segment sales of products similar to those sold to unaffiliated customers- P2,000,000 • Interest expense- P60,000 White has a reportable segment if that segment’s revenue isarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education