All-Mart is a department store with three major departments: Housewares, Hardware, and Electronics. Company management is very concerned about the performance of the electronics department, noting that it seems to be a drag on the company based on its most recent fiscal quarter. A company-wide segmented income statement follows: Housewares Hardware Electronics Total Sales $150,000 $220,000 $200,000 $570,000 Variable expenses 60,000 100,000 140,000 300,000 Contribution margin 90,000 120,000 60,000 270,000 Fixed expenses 50,000 100,000 90,000 240,000 Operating income (loss) $40,000 $20,000 $(30,000) $30,000 The company notes that if the electronics department were dropped, the other departments could expect a 10% decrease in foot traffic and sales. Also, $20,000 of the electronics department’s fixed costs are allocated and would continue even if the department was dropped. The company has no planned use for the space currently used by the electronics department. needed Compute the net dollar advantage or disadvantage of dropping the electronics department.
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.
All-Mart is a department store with three major departments: Housewares, Hardware, and Electronics. Company management is very concerned about the performance of the electronics department, noting that it seems to be a drag on the company based on its most recent fiscal quarter. A company-wide segmented income statement follows:
|
|
Housewares |
Hardware |
Electronics |
Total |
|
Sales |
$150,000 |
$220,000 |
$200,000 |
$570,000 |
|
Variable expenses |
60,000 |
100,000 |
140,000 |
300,000 |
|
Contribution margin |
90,000 |
120,000 |
60,000 |
270,000 |
|
Fixed expenses |
50,000 |
100,000 |
90,000 |
240,000 |
|
Operating income (loss) |
$40,000 |
$20,000 |
$(30,000) |
$30,000 |
The company notes that if the electronics department were dropped, the other departments could expect a 10% decrease in foot traffic and sales. Also, $20,000 of the electronics department’s fixed costs are allocated and would continue even if the department was dropped. The company has no planned use for the space currently used by the electronics department.
needed
Compute the net dollar advantage or disadvantage of dropping the electronics department.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
