Exercise 4-44 (Algo) Dropping Product Lines (LO 4-4) Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 389,300 240,600 156,230 $(7,530) 44 Inch $ 593,300 294,680 234,464 $ 64,156 54 Inch $ 371,100 172,500 147,806 $ 50,794 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line?

Exercise 4-44 (Algo) Dropping Product Lines (LO 4-4) Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 389,300 240,600 156,230 $(7,530) 44 Inch $ 593,300 294,680 234,464 $ 64,156 54 Inch $ 371,100 172,500 147,806 $ 50,794 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Question: 1)Accounting Information System is a option: a) manual system b) computer-cased system required: please answer this question by choosing the right option.
Fill out the missing columns and show the calculation and formulas
What is a data dictionary?
Will you please provide the formulas (explanation) to understand the results or numbers that were added in the solution?
Use the information in the following table to answer the questions below
Can i have the steps in formula form please
where is the correcting entry of the following?
Making the information physically available or accessible to the potential users is termed as: a. Content utility b. Form utility c. Place utility d. Time utility
Give an application for a replicated database.
show journal entry (for part b) assuming estimate is considered to be accurate. and show a journal entry (from part b) assuming the amount is large enough to intentionally impact decision of users.
Please show the calculations for one of them how the NRV(b is received.