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1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours. Nutterco, Inc. Traditional Income Statement Peanut Butter Cashew Butter Total Less variable expenses: Contribution margin Product margin Operating income Using this approach, determine whether the cashew butter product line should be kept or dropped. 2. Prepare an activity-based segmented income statement. Use a minus sign to indicate a negative product margin. Nutterco, Inc. Activity-Based Income Statement Peanut Butter Cashew Butter Total

1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours. Nutterco, Inc. Traditional Income Statement Peanut Butter Cashew Butter Total Less variable expenses: Contribution margin Product margin Operating income Using this approach, determine whether the cashew butter product line should be kept or dropped. 2. Prepare an activity-based segmented income statement. Use a minus sign to indicate a negative product margin. Nutterco, Inc. Activity-Based Income Statement Peanut Butter Cashew Butter Total

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours. Nutterco, Inc. Traditional Income Statement Peanut Butter Cashew Butter Total Less variable expenses: Contribution margin Product margin Operating income Using this approach, determine whether the cashew butter product line should be kept or dropped. 2. Prepare an activity-based segmented income statement. Use a minus sign to indicate a negative product margin. Nutterco, Inc. Activity-Based Income Statement Peanut Butter Cashew Butter Total $
Transcribed Image Text:1. Prepare a traditional segmented income statement, using a unit-level overhead rate based on direct labor hours. Nutterco, Inc. Traditional Income Statement Peanut Butter Cashew Butter Total Less variable expenses: Contribution margin Product margin Operating income Using this approach, determine whether the cashew butter product line should be kept or dropped. 2. Prepare an activity-based segmented income statement. Use a minus sign to indicate a negative product margin. Nutterco, Inc. Activity-Based Income Statement Peanut Butter Cashew Butter Total $
Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two, peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewer jars per case. Data concerning the two products follow: Peanut Cashew Unused units of Purchaseb Butter Butter Capacity² Expected sales (in cases) 50,000 10,000 Selling price per case $100 $80 Direct labor hours 40,000 10,000 As needed Receiving orders 500 250 250 500 Packing orders 1,000 500 500 250 Material cost per case $ 50 $49 Direct labor cost per case $10 $8 Advertising costs $200,000 $60,000 apractical capacity less expected usage (all unused capacity is permanent). bIn some cases, activity capacity must be purchased in steps (whole units). These steps are provided as necessary. The cost per step is the fixed activity rate multiplied by the step units. The fixed activity rate is the expected fixed activity costs divided by practical activity capacity. Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity driver. Activity Fixeda Variableb Direct labor benefits Machine Receiving Packing Total costs $0 $200,000 200,000 250,000 200,000 22,500 100,000 45,000 $500,000 $517,500
Transcribed Image Text:Nutterco, Inc., produces two types of nut butter: peanut butter and cashew butter. Of the two, peanut butter is the more popular. Cashew butter is a specialty line using smaller jars and fewer jars per case. Data concerning the two products follow: Peanut Cashew Unused units of Purchaseb Butter Butter Capacity² Expected sales (in cases) 50,000 10,000 Selling price per case $100 $80 Direct labor hours 40,000 10,000 As needed Receiving orders 500 250 250 500 Packing orders 1,000 500 500 250 Material cost per case $ 50 $49 Direct labor cost per case $10 $8 Advertising costs $200,000 $60,000 apractical capacity less expected usage (all unused capacity is permanent). bIn some cases, activity capacity must be purchased in steps (whole units). These steps are provided as necessary. The cost per step is the fixed activity rate multiplied by the step units. The fixed activity rate is the expected fixed activity costs divided by practical activity capacity. Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity driver. Activity Fixeda Variableb Direct labor benefits Machine Receiving Packing Total costs $0 $200,000 200,000 250,000 200,000 22,500 100,000 45,000 $500,000 $517,500
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