2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Brofit will
2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Brofit will
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![applies to the questions displayed below.]
Diego Company manufactures one product that is sold for $75 per
unit in two geographic regions-the East and West regions. The
following information pertains to the company's first year of
operations in which it produced 46,000 units and sold 42,000 units.
Variable costs per unit:
Manufacturing:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expense
Profit will
The company sold 31,000 units in the East region and 11,000 units in
the West region. It determined that $200,000 of its fixed selling and
administrative expense is traceable to the West region, $150,000 is
traceable to the East region, and the remaining $38,000 is a common
fixed expense. The company will continue to incur the total amount of
its fixed manufacturing overhead costs as long as it continues to
produce any amount of its only product.
14. Diego is considering eliminating the West region because an internally generated
report suggests the region's total gross margin in the first year of operations was
$46,000 less than its traceable fixed selling and administrative expenses. Diego
believes that if it drops the West region, the East region's sales will grow by 5% in Year
2. Using the contribution approach for analyzing segment profitability and assuming all
else remains constant in Year 2, what would be the profit impact of dropping the West
region in Year 2?
< Prev
by
S
14 15
$ 25
$ 20
$2
$4
of 15 ...
$ 644,000
$ 388,000
Next >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4119fedc-b5ba-442d-99f8-6b329401f211%2F67a8859d-9250-429b-80f0-d7274516113c%2F5limg38_processed.jpeg&w=3840&q=75)
Transcribed Image Text:applies to the questions displayed below.]
Diego Company manufactures one product that is sold for $75 per
unit in two geographic regions-the East and West regions. The
following information pertains to the company's first year of
operations in which it produced 46,000 units and sold 42,000 units.
Variable costs per unit:
Manufacturing:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expense
Profit will
The company sold 31,000 units in the East region and 11,000 units in
the West region. It determined that $200,000 of its fixed selling and
administrative expense is traceable to the West region, $150,000 is
traceable to the East region, and the remaining $38,000 is a common
fixed expense. The company will continue to incur the total amount of
its fixed manufacturing overhead costs as long as it continues to
produce any amount of its only product.
14. Diego is considering eliminating the West region because an internally generated
report suggests the region's total gross margin in the first year of operations was
$46,000 less than its traceable fixed selling and administrative expenses. Diego
believes that if it drops the West region, the East region's sales will grow by 5% in Year
2. Using the contribution approach for analyzing segment profitability and assuming all
else remains constant in Year 2, what would be the profit impact of dropping the West
region in Year 2?
< Prev
by
S
14 15
$ 25
$ 20
$2
$4
of 15 ...
$ 644,000
$ 388,000
Next >
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