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Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36- inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141,230 $ (6,030) If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required A Required B Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? 44 Inch $ 561,800 279,680 219,464 $ 62,656 Complete this question by entering your answers in the tabs below. Revenue Less variable costs Contribution margin Less fixed costs Operating profit 54 Inch $ 339,600 157,500 132,806 $ 49,294 Status Quo Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop 36-Inch Fan Difference decrease decrease decrease decrease

Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36- inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141,230 $ (6,030) If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required A Required B Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? 44 Inch $ 561,800 279,680 219,464 $ 62,656 Complete this question by entering your answers in the tabs below. Revenue Less variable costs Contribution margin Less fixed costs Operating profit 54 Inch $ 339,600 157,500 132,806 $ 49,294 Status Quo Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop 36-Inch Fan Difference decrease decrease decrease decrease

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36- inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141, 230 $ (6,030) Required A Required B If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. 44 Inch $ 561,800 Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Revenue Less variable costs Contribution margin Less fixed costs Operating profit 279,680 219,464 $ 62,656 Complete this question by entering your answers in the tabs below. Status Quo 54 Inch $ 339,600 157,500 132,806 $ 49,294. Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop 36-Inch Fan Difference decrease decrease decrease decrease
Transcribed Image Text:Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36- inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141, 230 $ (6,030) Required A Required B If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. 44 Inch $ 561,800 Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Revenue Less variable costs Contribution margin Less fixed costs Operating profit 279,680 219,464 $ 62,656 Complete this question by entering your answers in the tabs below. Status Quo 54 Inch $ 339,600 157,500 132,806 $ 49,294. Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop 36-Inch Fan Difference decrease decrease decrease decrease
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