Joy Company had the following segmented statement for a party supplies represented by product line. Jingle Belle Gifts TOTALS Sales 20,000 30,000 50,000 100,000 Cost of Goods Sold 10,000 18,000 40,000 68,000 Gross Margin 10,000 12,000 10,000 32,000 Operating Expenses: Administrative 5,000 5,000 5,000 15,000 Selling 3,000 4,500 7,500 15,000 Net Income 2,000 2,500 -2,500 2,000 Assume that administrative expense is a common cost which has been allocated equally to each product line; selling expenses are 15% of sales. The firm has suggested eliminating Gifts. Required: What would be the impact on total net income if this suggestion were adopted? (Indicate decrease or increase and the amount.
Joy Company had the following segmented statement for a party supplies represented by product line. Jingle Belle Gifts TOTALS Sales 20,000 30,000 50,000 100,000 Cost of Goods Sold 10,000 18,000 40,000 68,000 Gross Margin 10,000 12,000 10,000 32,000 Operating Expenses: Administrative 5,000 5,000 5,000 15,000 Selling 3,000 4,500 7,500 15,000 Net Income 2,000 2,500 -2,500 2,000 Assume that administrative expense is a common cost which has been allocated equally to each product line; selling expenses are 15% of sales. The firm has suggested eliminating Gifts. Required: What would be the impact on total net income if this suggestion were adopted? (Indicate decrease or increase and the amount.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Joy Company had the following segmented statement for a party supplies represented by product line.
|
|
Jingle |
Belle |
Gifts |
TOTALS |
|
Sales |
20,000 |
30,000 |
50,000 |
100,000 |
|
Cost of Goods Sold |
10,000 |
18,000 |
40,000 |
68,000 |
|
Gross Margin |
10,000 |
12,000 |
10,000 |
32,000 |
|
Operating Expenses: |
|
|
|
|
|
Administrative |
5,000 |
5,000 |
5,000 |
15,000 |
|
Selling |
3,000 |
4,500 |
7,500 |
15,000 |
|
Net Income |
2,000 |
2,500 |
-2,500 |
2,000 |
Assume that administrative expense is a common cost which has been allocated equally to each product line; selling expenses are 15% of sales. The firm has suggested eliminating Gifts.
Required: What would be the impact on total net income if this suggestion were adopted? (Indicate decrease or increase and the amount.
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