A value-driven car manufacturer, Whispering, started its business more than 50 years ago, making and selling a sedan body style. Sedans were popular at the time, and this one drove the success of Whispering for years due to its practical yet stylish nature. As times changed, Whispering designed models in different body styles, and those models have outpaced sedans, as follows. Sales Variable costs Contribution margin Fixed costs (a) (c) Sedan Truck $1,208,000 $4,182,000 $3,924,000 1,782,000 817,600 894.000 1,195,000 Operating income (loss) $(306,600) $1,294,000 $947,000 ✓ Your answer is correct. eTextbook and Media Whispering would be better off Sales Less: Variable costs Contribution margin Less: Direct fixed costs 697,000 Segment margin Less: Allocated fixed costs 511,000 The income statements above reflect the second consecutive year the sedan category has lost money. Whispering is concerned about dropping this vehicle, however, since the company's success was originally built on it. $ $ Whispering believes it can save $613,200 in fixed costs associated with the sedans if it drops that vehicle category. Should the company seriously consider dropping it? How much better or worse off, financially, would it be by dropping the sedan? $ Operating income $ SUV 1,994,000 2,188,000 by $ Sedan 2,142,000 Assume that 75% of the fixed costs shown in the original information, for all product lines, are direct fixed costs. The remaining fixed costs are common fixed costs, allocated to the product lines according to their sales volumes. Recast the product-line income statements detailing the direct and allocated fixed costs for each, including a subtotal for segment margin and an overall total column. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) $ Van $2,013,000 102200 1,105,000 908,000 SUV 804,000 $104,000 $ $ Attempts: 1 of 3 used $ Truck
A value-driven car manufacturer, Whispering, started its business more than 50 years ago, making and selling a sedan body style. Sedans were popular at the time, and this one drove the success of Whispering for years due to its practical yet stylish nature. As times changed, Whispering designed models in different body styles, and those models have outpaced sedans, as follows. Sales Variable costs Contribution margin Fixed costs (a) (c) Sedan Truck $1,208,000 $4,182,000 $3,924,000 1,782,000 817,600 894.000 1,195,000 Operating income (loss) $(306,600) $1,294,000 $947,000 ✓ Your answer is correct. eTextbook and Media Whispering would be better off Sales Less: Variable costs Contribution margin Less: Direct fixed costs 697,000 Segment margin Less: Allocated fixed costs 511,000 The income statements above reflect the second consecutive year the sedan category has lost money. Whispering is concerned about dropping this vehicle, however, since the company's success was originally built on it. $ $ Whispering believes it can save $613,200 in fixed costs associated with the sedans if it drops that vehicle category. Should the company seriously consider dropping it? How much better or worse off, financially, would it be by dropping the sedan? $ Operating income $ SUV 1,994,000 2,188,000 by $ Sedan 2,142,000 Assume that 75% of the fixed costs shown in the original information, for all product lines, are direct fixed costs. The remaining fixed costs are common fixed costs, allocated to the product lines according to their sales volumes. Recast the product-line income statements detailing the direct and allocated fixed costs for each, including a subtotal for segment margin and an overall total column. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) $ Van $2,013,000 102200 1,105,000 908,000 SUV 804,000 $104,000 $ $ Attempts: 1 of 3 used $ Truck
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:A value-driven car manufacturer, Whispering, started its business more than 50 years ago, making and selling a sedan body style.
Sedans were popular at the time, and this one drove the success of Whispering for years due to its practical yet stylish nature. As times
changed, Whispering designed models in different body styles, and those models have outpaced sedans, as follows.
Sales
Variable costs
Contribution margin
Fixed costs
Operating income (loss)
(a)
(c)
✓ Your answer is correct.
e Textbook and Media
Sales
Less: Variable costs
Sedan
$1,208.000 $4,182,000
Contribution margin
Less: Direct fixed
costs
Segment margin
Less: Allocated fixed
costs
697.000
511.000
817,600
$(306.600) $1,294,000
1
The income statements above reflect the second consecutive year the sedan category has lost money. Whispering is concerned about
dropping this vehicle, however, since the company's success was originally built on it.
$
SUV
$
Operating income $
$
1,994,000
Whispering believes it can save $613,200 in fixed costs associated with the sedans if it drops that vehicle category. Should the
company seriously consider dropping it? How much better or worse off, financially, would it be by dropping the sedan?
Whispering would be better off V by $
2.188.000
Sedan
894.000
Truck
$3,924.000 $2,013,000
1,105,000
908.000
Assume that 75% of the fixed costs shown in the original information, for all product lines, are direct fixed costs. The remaining
fixed costs are common fixed costs, allocated to the product lines according to their sales volumes. Recast the product-line income
statements detailing the direct and allocated fixed costs for each, including a subtotal for segment margin and an overall total
column. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
1,782,000
$
2.142.000
$
1.195.000
$947,000
Van
102200
804,000
$104,000
SUV
$
$
$
Attempts: 1 of 3 used
$
Truck
15
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
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,
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