**Transcription:**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 cost per unit:**- Direct materials: $25- Direct labor: $20- Manufacturing overhead: $2- Variable selling and administrative expenses: $4 **Fixed costs:**- Fixed manufacturing overhead: $644,000- Fixed selling and administrative expenses: $388,000 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 expenses is traceable to the West region. $150,000 is traceable to the East region. The company will continue to incur these traceable fixed expenses if the company retains the corresponding region. Fixed manufacturing overhead and the remaining fixed selling and administrative expense are companywide and will continue to incur the total amount of fixed expenses. The West region will continue to sell any product produced. The East region will sell any product as long as it continues to produce any amount of its only product.1. Diego is considering eliminating the West region because an internally generated segmented report shows that the West region’s sales will grow by 5% in Year 2. Assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Profit will ______ by ______.

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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