Exercise 6-17 (Static) Working with a Segmented Income Statement [LO6-4] Assume Minneapolis's sales by major market are: Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Minneapolis $ 300,000 100% 180,000 60% 120,000 40% 33,000 11% 87,000 29% 15,000 5% $ 72,000 24% Market Medical Dental $ 200,000 100% $ 100,000 100% 128,000 64% 52,000 52% 72,000 48,000 48% 12,000 21 000 21% $ 60,000 $ 27,000 27% 36% 6% 30% The company is planning a $5,000 advertising campaign next month in either the Medical or Dental market. Marketing studies indicate this campaign would increase Medical market sales by $40,000 or Dental market sales by $35,000. Required: 1. How much would the company's profits increase (decrease) if it advertised in the Medical market? 2. How much would the company's profits increase (decrease) if it advertised in the Dental market? 3. Should the company advertise in the Medical or Dental market?

Exercise 6-17 (Static) Working with a Segmented Income Statement [LO6-4] Assume Minneapolis's sales by major market are: Sales Variable expenses Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Minneapolis $ 300,000 100% 180,000 60% 120,000 40% 33,000 11% 87,000 29% 15,000 5% $ 72,000 24% Market Medical Dental $ 200,000 100% $ 100,000 100% 128,000 64% 52,000 52% 72,000 48,000 48% 12,000 21 000 21% $ 60,000 $ 27,000 27% 36% 6% 30% The company is planning a $5,000 advertising campaign next month in either the Medical or Dental market. Marketing studies indicate this campaign would increase Medical market sales by $40,000 or Dental market sales by $35,000. Required: 1. How much would the company's profits increase (decrease) if it advertised in the Medical market? 2. How much would the company's profits increase (decrease) if it advertised in the Dental market? 3. Should the company advertise in the Medical or Dental market?

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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Exercise 10-9 (Algo) Return on Investment (ROI) and Residual Income Relations [LO10-1, LO10-2] A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be Indicated by a minus sign. Do not round your Intermediate calculations.) Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income Company A Company B Company C $ 450,000 $ 650,000 $ 610,000 $ 44,000 $ 166,000 24 % $ 155,000 19 % % 13 % % 10 % $ 51,000 $ 7,000
Problem 14-44 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning of the-year Investment when computing ROI and residual income. Ignore income taxes. Allocated corp. overhead Cost of goods sold Divisional investment R&D AC Division $ 615 3,230 9,300 2,150 8,600 so Division $ 1,650 6,000 78, 500 3,600 18, 500 1,380 Sales SGRA 745 R&D is assumed to have a two-year life in the AC Divisilon and a nine year life in the SO division. All R&D expenditures are spent at the beginning of the year.…
Exercise 6-11 (Algo) Segmented Income Statement [LO6-4] Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses $ 1,601,000 649,870 951,130 1,046,000 $ (94,870) East $ 391,000 47% $ 269,000 Req 1 Complete this question by entering your answers in the tabs below. Req 2A Division Central $630,000 39% $ 326,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $29,000 will increase that division's sales by 12%.…
Exercise 12-40 (Algo) Single versus Dual Rates (LO 12-5, 6) Kentfield Advisory Services (KAS) is a large management consulting firm organized into two groups: Governmental Services (GS) and Commercial Support (CS). Corporate information technology (IT) services support both groups. The cost of computer support is $48 million. The following information is given: Governmental Services Commercial Support Utilization 42% 58 Revenues (5000) $ 242,820 441,180 Required: What is the cost allocation if fixed IT costs of $37.4 million are allocated on the basis of utilization and the remaining costs (all variable) are allocated on the basis of group revenues? Note: Do not round intermediate calculations. Enter your answers in dollars, not in millions or thousands.
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statement be segmented by sales region. The company's first effort at preparing a segmented state- ment is given below. This statement is for May, the most recent month of activity. CORL EM 13-30 Restructuring a Segmented Income Statement [LO1] PAes have been incurred at Millard Corporation for some time In an effort to isolate the problem d improve the company's performance, management has requested that the monthly income Sales Region West Central East Sales $450,000 S800,000 $ 750,000 Regional expenses (traceable): Cost of goods sold . Advertising . . Salaries Utilities Depreciation. Shipping expense. 162,900 108,000 280,000 376,500 210,000 135,000 200,000 90,000 88,000 13,500 12,000 15,000 30,000 28,500 27,000 28,000 17,100 32,000 Total regional expenses 418,500 640,000 795,000 Regional income (loss) before corporate expenses 31,500 160,000 (45,000) Corporate expenses: Advertising (general) General administrative expense. 30,000 50,000 18,000 32,000 50,000 50,000 Total corporate…
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