Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900
Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers,
personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes
At the end of the year, Gary needs to performa profitability analysis for each product line to better evaluate the company's pricing
strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see
what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three
support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance
hours used, and IT hours used, respectively.
Sales
Costs
Four-Wheelers
$1.126,000
Number of employees
Maintenance hours
IT hours
Personal Watercraft
$1,416,000
Payroll
$95,000
2
100
150
Maintenance
IT
$116,000 $250,000
3
Snowmobiles
$1,996,000
200
40
4
150
220
Watercraft
$850,000 $1,156,000
Four-Wheelers
20
1.800
800
18
750
1.250
Snowmobiles
$1,745,000
27
1,300
900
oz
52 82 82
V
Ac
Qu
Transcribed Image Text:(a)
Use Excel to allocate the three support department costs to the three product lines using the reciprocal method. (Round answers to
2 decimal places, eg. 15,25)
Costs
4-Wheelers
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Operating Units
Watercraft
Snowmobiles
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