314Chapter 11Management is concerned about the continued losses shown by the roundtrampolines and wants a recommendation as to whether or not the line shouldbe discontinued. The special equipment used to produce the trampolines hasno resale value. If the round trampoline model is dropped, the two linesupervisors assigned to the model would be discharged.Required:1. Should production and sale of the round trampolines be discontinued?You may assume that the company has no other use for the capacity nowbeing used to produce the round trampolines. Show computations tosupport your answer.2. Recast the above data in a format that would be more usable tomanagement in assessing the long-run profitability of the various productlines. Problem 2 (Eliminate or Retain a Product Line)Cystal Sports Equipment manufactures round, rectangular, and octagonaltrampolines. Data on sales and expenses for the past month follow:TotalP1,000,000D410,000TrampolineRectangular OctagonalP500,000200,000300,000RoundSales.Less variable expenses.Contribution marginLess fixed expenses:Advertising - traceable .Depreciation of special equipmentLine supervisors' salaries. .General factory overhead*.Total fixed expenses ..Net operating income (loss) .P140,00060,00080,000P360,000150,000210,000...590,000216,00095,00019,000200,000530,000P 60,00041,00020,0006,00028,00095,000P(15.000)110,00040,0007,000100,000257,000P 43,00065,00035,0006,00072,000178,000Р 32,000*A common fixed cost that is allocated on the basis of sales pesos.

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Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model would be discharged. Required: 1. Should production and sale of the round trampolines be discontinued? You may assume that the company has no other use for the capacity now being used to produce the round trampolines. Show computations to support your answer. 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines.

Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model would be discharged. Required: 1. Should production and sale of the round trampolines be discontinued? You may assume that the company has no other use for the capacity now being used to produce the round trampolines. Show computations to support your answer. 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines.

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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