FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: Scented Musical Regular Total Sales $ 10,000 $15,000 $25,000 $50,000 Less: Variable expenses 7,000 12,000 12,500 31,500 Contribution margin $ 3,000 $ 3,000 $12,500 $18,500 Less: Direct fixed expenses 4,000 5,000 3,000 12,000 Segment margin $ (1,000) $ (2,000) $ 9,500 $ 6,500 Less: Common fixed expenses 7,500 Operating income (loss) $(1,000) Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is seriously considering dropping both the scented and musical product lines. However, before making a final decision, she consults Jim Dorn, FunTime’s vice president of marketing. Required: 1. Jim believes that by increasing advertising by $1,000 ($250 for the scented line and $750 for the musical line), sales of those two lines would increase by 30%. Prepare segmented income statements based on Jim's assumptions. Note: Enter all amounts as positive numbers except subtotals, if applicable. FunTime Segmented Income Statement Scented Musical Regular Total Sales $ $ $ $ Less: Variable expenses Contribution margin $ $ $ $ Less: Direct fixed expenses Segment margin $ $ $ $ Less: Common fixed expenses Operating income (loss) $ If you were Kathy, how would you react to this information? Kathy should this proposal. The 30% sales increase, coupled with the increased advertising, the loss. Both scented and musical product-line profits increase. However, more must be done. If the scented and musical product margins remain negative, the two products may need to be dropped. 2. Jim warns Kathy that eliminating the scented and musical lines would lower the sales of the regular line by 20%. Prepare an income statement for Fun Time assuming the Scented and Musical greeting card lines are dropped. Note: Enter all amounts as positive numbers except subtotals, if applicable. FunTime Income Statement (Regular Greeting Cards only) Sales $ Less: Variable expenses Contribution margin $ Less: Fixed expenses Operating income (loss) $ Given this information, would it be profitable to eliminate the scented and musical lines? While dropping the two lines results in of $ it is than the alternative offered in Requirement 1. 3. Suppose that eliminating either line reduces sales of the regular cards by 10%. Would a combination of increased advertising (the option described in Requirement 1) and eliminating one of the lines be beneficial? Prepare segmented income statements assuming the Musical line is dropped and advertising is increased. Note: Enter all amounts as positive numbers except subtotals, if applicable. FunTime Segmented Income Statement Scented Regular Total Sales $ $ $ Less: Variable expenses Contribution margin $ $ $ Less: Direct fixed expenses Segment margin $ $ $ Less: Common fixed expenses Operating income (loss) $ Based on your calculations above, identify the best combination for the firm
Process Costing
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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.
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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.
FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows:
| Scented | Musical | Regular | Total | |
| Sales | $ 10,000 | $15,000 | $25,000 | $50,000 |
| Less: Variable expenses | 7,000 | 12,000 | 12,500 | 31,500 |
| Contribution margin | $ 3,000 | $ 3,000 | $12,500 | $18,500 |
| Less: Direct fixed expenses | 4,000 | 5,000 | 3,000 | 12,000 |
| Segment margin | $ (1,000) | $ (2,000) | $ 9,500 | $ 6,500 |
| Less: Common fixed expenses | 7,500 | |||
| Operating income (loss) | $(1,000) |
Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is seriously considering dropping both the scented and musical product lines. However, before making a final decision, she consults Jim Dorn, FunTime’s vice president of marketing.
Required:1. Jim believes that by increasing advertising by $1,000 ($250 for the scented line and $750 for the musical line), sales of those two lines would increase by 30%.
Prepare segmented income statements based on Jim's assumptions.
Note: Enter all amounts as positive numbers except subtotals, if applicable.
| FunTime | |||||
| Segmented Income Statement | |||||
| Scented | Musical | Regular | Total | ||
| Sales | $ | $ | $ | $ | |
| Less: Variable expenses | |||||
| Contribution margin | $ | $ | $ | $ | |
| Less: Direct fixed expenses | |||||
| Segment margin | $ | $ | $ | $ | |
| Less: Common fixed expenses | |||||
| Operating income (loss) | $ |
If you were Kathy, how would you react to this information?
Kathy should this proposal. The 30% sales increase, coupled with the increased advertising, the loss. Both scented and musical product-line profits increase. However, more must be done. If the scented and musical product margins remain negative, the two products may need to be dropped.
2. Jim warns Kathy that eliminating the scented and musical lines would lower the sales of the regular line by 20%.
Prepare an income statement for Fun Time assuming the Scented and Musical greeting card lines are dropped.
Note: Enter all amounts as positive numbers except subtotals, if applicable.
| FunTime | |
| Income Statement | |
| (Regular Greeting Cards only) | |
| Sales | $ |
| Less: Variable expenses | |
| Contribution margin | $ |
| Less: Fixed expenses | |
| Operating income (loss) | $ |
Given this information, would it be profitable to eliminate the scented and musical lines?
While dropping the two lines results in of $ it is than the alternative offered in Requirement 1.
3. Suppose that eliminating either line reduces sales of the regular cards by 10%. Would a combination of increased advertising (the option described in Requirement 1) and eliminating one of the lines be beneficial?
Prepare segmented income statements assuming the Musical line is dropped and advertising is increased.
Note: Enter all amounts as positive numbers except subtotals, if applicable.
| FunTime | |||
| Segmented Income Statement | |||
| Scented | Regular | Total | |
| Sales | $ | $ | $ |
| Less: Variable expenses | |||
| Contribution margin | $ | $ | $ |
| Less: Direct fixed expenses | |||
| Segment margin | $ | $ | $ |
| Less: Common fixed expenses | |||
| Operating income (loss) | $ |
Based on your calculations above, identify the best combination for the firm.
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