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Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution marnin Torch $1,280 1,115 €165 Elk (Shown in 000's) $185 45 Walloon 140 $360 288 th Total $1,825 1,448

Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution marnin Torch $1,280 1,115 €165 Elk (Shown in 000's) $185 45 Walloon 140 $360 288 th Total $1,825 1,448

FINANCIAL ACCOUNTING
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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Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation. Advertising Torch $1,280 1,115 $165 Required: 50 95 Elk (Shown in 000's) $185 45 $140 15 Walloon 85 $360 288 $72 9 276 Segment margin $20 $40 $27 Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Total 196 $(33) $1,825 1,448 $377 74 Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in thoueande Enr avamale "15000" rather than "1"
Transcribed Image Text:Keep-or-Drop Decision Charlevoix Company produces three products: Torch, Elk, and Walloon. A segmented income statement follows: Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation. Advertising Torch $1,280 1,115 $165 Required: 50 95 Elk (Shown in 000's) $185 45 $140 15 Walloon 85 $360 288 $72 9 276 Segment margin $20 $40 $27 Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Total 196 $(33) $1,825 1,448 $377 74 Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in thoueande Enr avamale "15000" rather than "1"
Less direct fixed expenses: Depreciation Advertising 50 95 Required: 15 85 9 96 74 Segment margin $20 $40 $(33) $27 Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. 276 Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. 2. Conceptual Connection: Should Charlevoix keep or drop Walloon? Drop 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Increase 3. Conceptual Connection: Charlevoix's CFO decided to conduct an empirical study of previous years' advertising cost data to better understand the factors that have caused this important expense to vary from year to year. Briefly explain the data analytic type represented by the CFO's study of advertising cost. [Refer to Exhibit 2.2] The empirical study of past advertising cost represents an example of a diagnostic ✓data analytic.
Transcribed Image Text:Less direct fixed expenses: Depreciation Advertising 50 95 Required: 15 85 9 96 74 Segment margin $20 $40 $(33) $27 Direct fixed expenses consist of depreciation and advertising. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. 276 Assume that each of the three products has a different marketing campaign whose advertising would be eliminated if the associated product were dropped. 2. Conceptual Connection: Should Charlevoix keep or drop Walloon? Drop 1. Conceptual Connection: Estimate the impact on profit that would result from dropping Walloon. Enter amount in full, rather than in thousands. For example, "15000" rather than "15". Increase 3. Conceptual Connection: Charlevoix's CFO decided to conduct an empirical study of previous years' advertising cost data to better understand the factors that have caused this important expense to vary from year to year. Briefly explain the data analytic type represented by the CFO's study of advertising cost. [Refer to Exhibit 2.2] The empirical study of past advertising cost represents an example of a diagnostic ✓data analytic.
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