Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Acoustic Sales Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Rent Utilities Total expenses $ 102,900 44,975 Electric $ 84,000 47,550 57,925 36,450 4,985 4,320 10,080 8,540 20,100 17,800 2,010 1,780 7,095 5,950 2,995 2,640 47,265 41,030 Income (loss) $ 10,660 $ (4,580) 1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated?

Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Acoustic Sales Cost of goods sold Gross profit Expenses Advertising Depreciation-Equipment Salaries Supplies used Rent Utilities Total expenses $ 102,900 44,975 Electric $ 84,000 47,550 57,925 36,450 4,985 4,320 10,080 8,540 20,100 17,800 2,010 1,780 7,095 5,950 2,995 2,640 47,265 41,030 Income (loss) $ 10,660 $ (4,580) 1. Prepare a departmental contribution to overhead report. 2. Based on contribution to overhead, should the electric guitar department be eliminated?

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Description: Required 1Required 2Prepare a departmental contribution to overhead report.Departmental Contribution to OverheadFor Year Ended December 31Gross profitDirect expensesAcousticElectricCombinedTotal direct expenses000Departmental contribution to overhea

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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Below are departmental income statements for a guitar manufacturer. The company classifies advertising, rent, and utilities as indirect expenses. The manufacturer is considering eliminating its Electric Guitar department because it shows a loss. Departmental Income Statements For Year Ended December 31 Acoustic Electric Sales $ 102,900 $ 83,300 Cost of goods sold 44,175 47,350 Gross profit 58,725 35,950 Expenses Advertising 4,995 4,270 Depreciation—Equipment 10,080 8,560 Salaries 19,800 17,200 Supplies used 2,000 1,700 Rent 7,055 6,030 Utilities 2,965 2,620 Total expenses 46,895 40,380 Income (loss) $ 11,830 $ (4,430) Prepare a departmental contribution to the overhead report. Based on contribution to overhead, should the electric guitar department be eliminated?
Charles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31: Sales revenue Cost of goods sold Warranty expense Inspection costs Scrap and rework Product returns due to defects Depreciation expense Machine maintenance expense Wage expense Machine breakdown costs Estimated lost sales due to poor quality $ 250,000 140,000 22,000 14,000 7,800 6,000 10,000 3,400 35,000 4,000 5,000 Required: a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?
Gibson Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected to continue to do so. Last year’s income statements follow. Men’s Department Women’s Department Children’s Department Sales $ 660,000 $ 480,000 $ 200,000 Cost of goods sold (269,500 ) (179,600 ) (100,875 ) Gross margin 390,500 300,400 99,125 Department manager’s salary (60,000 ) (49,000 ) (29,000 ) Sales commissions (114,200 ) (83,600 ) (31,900 ) Rent on store lease (29,000 ) (29,000 ) (29,000 ) Store utilities (12,000 ) (12,000 ) (12,000 ) Net income (loss) $ 175,300 $ 126,800 $ (2,775 ) Required a. Calculate the contribution to profit. Determine whether to eliminate the children’s…
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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,559,000 567,150 991,850 1,091,000 $ (99,150) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 359,000 $ 291,000 45% Division Central $ 640,000 24% $ 329,000 West 560,000 45% $ 204,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would…
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Hancock Company manufactures and sells two lines of furniture, case goods and upholstery, During the most recent accounting period, the Case Goods and Upholstery Divisions sold 17,400 and 2,360 units, respectively. The company's most recent financial statements are shown below. Sales Less cost of goods sold: Unit-level production cost Depreciation, production equipment Gross margin Less operating expenses: Case Goods Upholstery $1,852,000 $472,000 1,156,000 276,000 $420,000 283,200 70,800 $118,000 Unit-level selling and administrative costs Corporate-level facility expenses (fixed) Net income (loss) If unit sales for both divisions increased 10% the company would report which of the following? 69,600 64,000 $286,400 59,000 64,000 $(5,000)
am .106.
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,600,000 700,400 899,600 990,000 $ (90,400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses East $ 440,000 $ 280,000 52% Division Central $ 620,000 $ 320,000 36% West $ 540,000 46% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $21,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much…