Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $232,500 Cost of goods sold (109,000) Gross profit $123,500 (143,000) $(19,500) Operating expenses Operating loss It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 22% 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 zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Revenues Costs: Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss) Differential Effects Discontinue Mango Cola Mango Cola (Alternative 1) (Alternative 2) (Alternative 2) b. Should Mango Cola be retained?

Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales $232,500 Cost of goods sold (109,000) Gross profit $123,500 (143,000) $(19,500) Operating expenses Operating loss It is estimated that 13% of the cost of goods sold represents fixed factory overhead costs and that 22% 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 zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Revenues Costs: Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss) Differential Effects Discontinue Mango Cola Mango Cola (Alternative 1) (Alternative 2) (Alternative 2) b. Should Mango Cola be retained?

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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ABC Manufacturing produces metal lampposts. The company's income statements for the last two years are given below. The company has no beginning or ending inventories. Last year 60,000 This year 85,000 $2,040,000 Units sold Sales $1,440,000 Less cost of goods sold Gross margin Less operating expenses 785,000 1,060,000 655,000 980,000 237,000 312,000 Net income $418.000 $668.000 Using the high/low method, determine the company's total variable cost per unit. O $15.50 per unit O $12 per unit O $11.75 per unit O $14 per unit
ABC Manufacturing produces metal lampposts. The company's income statements for the last two years are given below. The company has no beginning or ending inventories. Last Year This YearUnits sold. 60,000 85,000Sales. 1,440,000. 2,040,000Less cost of goods sold. 785,000 1,060,000 Gross margin 655,000 980,000Less operating expenses. 237,000 312,000Net income 418,000. 668,000 Determine the company's total fixed costs. a) 182,000b) 125,000c) 205,700d) 162,500
The following is the year ended data for Tiger Company: Sales Revenue $58,000 Cost of Goods Manufactured 21,000 Beginning Finished Goods Inventory 1,100 Ending Finished Goods Inventory 2,200 Selling Expenses 15,000 Administrative Expenses 3,900 What is the gross profit? A. $22,100 B. $38,100 C. $19,200 D.
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AJ Manufacturing Company Incurred $55,500 of fixed product cost and $44,400 of variable product cost during its first year of operation. Also during its first year, AJ incurred $17.650 of fixed and $14.100 of variable selling and administrative costs. The company sold all of the units it produced for $182.000. Required a. Prepare an income statement using the format required by generally accepted accounting Principles (GAAP) b. Prepare an income statement using the contribution margin approach. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). AJ MANUFACTURING COMPANY Income Statement
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Differential Analysis for a Discontinued Product 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 a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Cola February 29 Continue Discontinue Differential Mango Cola Effects Mango Cola (Alternative 1) (Alternative…
Whipple Company has sales revenue of $585,000. Cost of goods sold before adjustment is $335,000. The company uses machine hours to allocate manufacturing overhead and estimated 10,450 machine hours would be used during the year. For the year, manufacturing overhead was under-allocated by $13,400. The company's actual manufacturing overhead is $91,000. What is the actual gross profit? Select one: a. $250,000 b. $159,000 c. $236,600 d. $104,400 e. $263,400
Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income state for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss. Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labo dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold $ 1,706,000 1,221,008 484,992 570,000 $ (85,008) Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead…
Diff Analysis & Product Pricing:
AJ Manufacturing Company incurred $50,500 of fixed product cost and $40.400 of variable product cost during its first year of operation. Also during its first year, AJ incurred $16,150 of fixed and $13,100 of variable selling and administrative costs. The company sold all of the units it produced for $162,000. Required a. Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). b. Prepare an income statement using the contribution margin approach. Complete this question by entering your answers in the tabs below. Required A Required B Prepare an income statement using the format required by generally accepted accounting Principles (GAAP). AJ MANUFACTURING COMPANY Income Statement Required B > Mc Graw Hill