Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehiclefor recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The threemodels, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has preparedthe following forecasted income statement for the upcoming fiscal year (in thousands of dollars):Sales revenueCost of goods sold.Gross marginMarketing costs.Administrative costsTotal marketing and administrative.Operating profitsH-LH-LXH-LXSManagement has expressed special concern with the Southern market because of the extremely poor return on sales. Thismarket was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it wouldtake some time to build profitability in the market, but there has been no noticeable change in the low returns over time.The financial staff has also prepared product-line information to help the managers of the company decide whether to leavethe Southern market.Sales revenueVariable manufacturing costs as a percentage of sales revenueVariable marketing costs as a percentage of sales revenueSales revenue by market and product are as follows (in thousands of dollars):Required A Required B Required CSales revenueLess variable costs:CashMarketingAdministrativeNorthern$ 18,20013,70013,700would you recommend dropping the Southernmarket?Total variable costComplete this question by entering your answers in the tabs below.Contribution marginLess fixed costs:Salaries expenseManufacturingCashAdministrativeTotal fixed costsOperating profitSouthern$4,708Marketing costs that are not listed as variable are fixed for the period and separable by market. Fixed marketing costsassigned to the Southern market would be saved if that market were eliminated. Eliminating the Southern market will notaffect administrative costs or fixed manufacturing costs.4,7004,700Required:a. Assuming there are no alternative uses for Hazlett & Family's present capacity, would you recommend dropping theSouthern market?b. Prepare the forecasted annual income statement showing contribution margins by products. Do not allocate fixed costs toproducts.c. It is believed that a new model can be ready for sale next year if Hazlett decides to go ahead with continued research. Thenew product would replace H-LX and can be produced by simply converting equipment presently used in producing the H-LXmodel. This conversion will increase fixed costs by $454,000 annually. What must be the minimum annual contribution marginfor the new model to make the changeover financially feasible?X♥Annual contribution marginAssuming there are no alternative uses for Hazlett & Family's present capacity, would you recommend dropping the Southernmarket?x✔•Total$ 59,18045,850$13,250✓4,8252,394$7,219$ 6,031Prepare the forecasted annual income statement showing contribution margins by products. Do not allocate fixed costs toproducts. (Enter your answers in thousands. (i.e., 5,400,000 should be entered as 5,400).)Northern$ 45,30035,075No455 x455 x5551,46544,090$ 10,2252,7501,850Model H-L Model H-LX45,555 $ 5,544$•$ 467,000$4,600$ 5,6251,1454,39955 X545 x545Southern$ 13,80010,775$3,0252,075544$ 2,619$ 406Model H-LXS$ 5,45555 x455 x5541,0644,391H-L$ 22,708$$50%5$TotalProductsH-LX$ 18,200554,45575%2554 x5,455 x4,45510,464543,991H-LXS$ 18,2006,554 x655 x5546,665 x14,428529,56365%3Required A Required B Required CIt is believed that a new model can be ready for sale next year if Hazlett decides to go ahead with continued research. Thenew product would replace H-LX and can be produced by simply converting equipment presently used in producing the H-LXmodel. This conversion will increase fixed costs by $454,000 annually. What must be the minimum annual contribution marginfor the new model to make the changeover financially feasible? (Enter your answer in thousands. (i.e., 5,400,000 should beentered as 5,400).)Show less A

The contribution margin is computed by deducting the variable cost of sales from the sales revenue.…

Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold Gross margin Marketing costs. Administrative costs Total marketing and administrative Operating profits H-L H-LX H-LXS Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change in the low returns over time. The financial staff has also prepared product-line information to help the managers of the company decide whether to leave the Southern market. Sales revenue Variable manufacturing costs as a percentage of sales revenue Variable marketing costs as a percentage of sales revenue Sales revenue by market and product are as follows (in thousands of dollars): Sales revenue Less variable costs: Cash Marketing Administrative Northern $ 18,200 Total variable cost 13,780 13,700 Complete this question by entering your answers in the tabs below. would you recommend dropping the Southern market? Contribution margin Less fixed costs: Salaries expense Manufacturing Cash Administrative Marketing costs that are not listed as variable are fixed for the period and separable by market. Fixed marketing costs assigned to the Southern market would be saved if that market were eliminated. Eliminating the Southern market will not MATURITA affect administrative costs or fixed manufacturing costs. Required: a. Assuming there are no alternative uses for Hazlett & Family's present capacity, would you recommend dropping the Southern market? Total fixed costs Operating profit b. Prepare the forecasted annual income statement showing contribution margins by products. Do not allocate fixed costs to products. c. It is believed that a new model can be ready for sale next year if Hazlett decides to go ahead with continued research. The new product would replace H-LX and can be produced by simply converting equipment presently used in producing the H-LX model. This conversion will increase fixed costs by $454,000 annually. What must be the minimum annual contribution margin for the new model to make the changeover financially feasible? Required A Required B Assuming there are no alternative uses for Hazlett & Family's present capacity, would you recommend dropping the Southern market? Southern $4,708 4,700 4,700 X ✓ X ✔ Annual contribution margin ✪ ✔ Required A Required B Prepare the forecasted annual income statement showing contribution margins by products. Do not allocate fixed costs to products. (Enter your answers in thousands. (i.e., 5,400,000 should be entered as 5,400).) GEMEENTELING Required C $ Total $ 59,180 45 950 45,850 $13,250 Model H-L 4,825 2,394 $ 7,219 $6,031 45,555 455 X 455 X 555 1,465 44,090 Required C Northern $ 45,300 35,875 $ 10,225 2,750 1,850 $4,600 $ 5,625 No 467,000 • Model H-LX $ Southern $ 13,808 10,775 $ 3,025 2,075 544 $ 2,619 $ 406 5,544 x $ 55 X 545 x 545 1,145 4,399 Model H-LXS 5.455 S H-L $ 22,700 55 x 455 X 554 1,064 4,391 50% 5 $ $ Total Products H-LX $ 18,200 554,455 x 75% 2 554 x 5,455 X 4,455 H-LXS $ 18,208 10,464 543,991 6,554 x 655x 554 6,665X 14,428 529,563 65% 3 It is believed that a new model can be ready for sale next year if Hazlett decides to go ahead with continued research. The new product would replace H-LX and can be produced by simply converting equipment presently used in producing the H-LX model. This conversion will increase fixed costs by $454,000 annually. What must be the minimum annual contribution margin for the new model to make the changeover financially feasible? (Enter your answer in thousands. (i.e., 5,400,000 should be entered as 5,400).) Show less A