A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year: Sales $234,500 Cost of goods sold 109,000 Gross profit $125,500 Operating expenses 143,000 Loss from operations $(17,500) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Differential Effect Continue King Cola (Alternative 1) Cola (Alternative 2) Discontinue King on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) 0 000

A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year: Sales $234,500 Cost of goods sold 109,000 Gross profit $125,500 Operating expenses 143,000 Loss from operations $(17,500) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2) January 21 Differential Effect Continue King Cola (Alternative 1) Cola (Alternative 2) Discontinue King on Income (Alternative 2) Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Income (Loss) 0 000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 3CE: Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month...

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Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual variable unit cost is as follows: Fixed overhead was 320,000. Fixed selling expenses consisted of advertising copayments totaling 110,000. Fixed administrative expenses were 236,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was 148,000 for 4,000 juicers. The value of ending inventory reported on the financial statements was Refer to the information in 2.24. The gross margin percentage for last year was a. 12.57% b. 55.67% c. 28.95% d. 38.33%
Cost of Goods Manufactured, Income Statement W. W. Phillips Company produced 4,000 leather recliners during the year. These recliners sell for 400 each. Phillips had 500 recliners in finished goods inventory at the beginning of the year. At the end of the year, there were 700 recliners in finished goods inventory. Phillips accounting records provide the following information: Required: 1. Prepare a statement of cost of goods manufactured. 2. Compute the average cost of producing one unit of product in the year. 3. Prepare an income statement for external users.
Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual variable unit cost is as follows: Fixed overhead was 320,000. Fixed selling expenses consisted of advertising copayments totaling 110,000. Fixed administrative expenses were 236,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was 148,000 for 4,000 juicers. The value of ending inventory reported on the financial statements was a. 55,500 b. 92,500 c. 66,500 d. 39,900
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the year ended December 31: Assume that 8,500 million of cost of goods sold and 4,000 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows: Also, assume that 30% of the beginning and ending inventories were fixed costs. a. Prepare an income statement according to the variable costing concept for Caterpillar Inc. Round numbers to nearest million. b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts. Round numbers to nearest million.
Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month with the following unit costs: Fixed overhead per unit = 280,000/40,000 units produced = 7. Total fixed factory overhead is 280,000 per month. During October, 38,400 units were sold at a price of 24, and fixed marketing and administrative expenses were 130,500. Required: 1. Calculate the cost of each unit using absorption costing. 2. How many units remain in ending inventory? What is the cost of ending inventory using absorption costing? 3. Prepare an absorption-costing income statement for Pattison Products, Inc., for the month of October. 4. What if November production was 40,000 units, costs were stable, and sales were 41,000 units? What is the cost of ending inventory? What is operating income for November?
Wyandotte Company provided the following information for the last calendar year: During the year, direct materials purchases amounted to 256,900, direct labor cost was 176,000, and overhead cost was 308,400. There were 40,000 units produced. Required: 1. Calculate the total cost of direct materials used in production. 2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost. 3. Of the unit manufacturing cost calculated in Requirement 2, 6.62 is direct materials and 7.71 is overhead. What is the prime cost per unit? Conversion cost per unit?
Ellerson Company provided the following information for the last calendar year: During the year, direct materials purchases amounted to 278,000, direct labor cost was 189,000, and overhead cost was 523,000. During the year, 100,000 units were completed. Required: 1. Calculate the total cost of direct materials used in production. 2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost. 3. Of the unit manufacturing cost calculated in Requirement 2, 2.70 is direct materials and 5.30 is overhead. What is the prime cost per unit? Conversion cost per unit?
A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $237,400 Cost of goods sold (112,000) Gross profit $125,400 Operating expenses (146,000) Operating loss $(20,600) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Mango Cola Mango Cola Revenues Costs: Variable cost of goods sold…
A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $15,000,000 Cost of goods sold (10,800,000) Gross profit $4,200,000 Operating expenses (8,000,000) Operating loss $(3,800,000) It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 25% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Cola (Alternative 1) (Alternative 2) (Alternative 2) Mango Cola Effects Revenues Costs: Variable cost of…
A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year: Sales $236,100 Cost of goods sold 112,000 Gross profit $124,100 Operating expenses 142,000 Loss from operations $(17,900) It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 21% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. Question Content Area a. Prepare a differential analysis, dated March 3, to determine whether King Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential AnalysisContinue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)January 21 Continue KingCola (Alternative 1) Discontinue KingCola (Alternative 2) Differential Effecton Income(Alternative 2)…
A condensed income statement by product line for British Beverage Inc. indicated the following for King Cola for the past year: Sales $235,100 Cost of goods sold 112,000 Gross profit $123,100 Operating expenses 145,000 Loss from operations $(21,900) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since King Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether to Continue King Cola (Alternative 1) or Discontinue King Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisContinue King Cola (Alt. 1) or Discontinue King Cola (Alt. 2)March 3 Continue KingCola (Alternative 1) Discontinue KingCola (Alternative 2) Differential…