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Problem 2 (Eliminate or Retain a Product Line) Crystal Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data on sales and expenses for the past month follow: Total P1,000,000 410,000 590,000 Round P140,000 60,000 80,000 Trampoline Rectangular Octagonal P500,000 200,000 300,000 Sales. Less variable expenses. Contribution margin. Less fixed expenses: Advertising – traceable Depreciation of special equipment Line supervisors' salaries... General factory overhead* Total fixed expenses Net operating income (loss). P360,000 150,000 210,000 216,000 95,000 19,000 200,000 530,000 P 60,000 41,000 20,000 6,000 28,000 95,000 P(15,000) 110,000 40,000 7,000 100,000 257,000 P 43,000 65,000 35,000 6,000 72,000 178,000 P 32,000 * A common fixed cost that is allocated on the basis of sales pesos.

Problem 2 (Eliminate or Retain a Product Line) Crystal Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data on sales and expenses for the past month follow: Total P1,000,000 410,000 590,000 Round P140,000 60,000 80,000 Trampoline Rectangular Octagonal P500,000 200,000 300,000 Sales. Less variable expenses. Contribution margin. Less fixed expenses: Advertising – traceable Depreciation of special equipment Line supervisors' salaries... General factory overhead* Total fixed expenses Net operating income (loss). P360,000 150,000 210,000 216,000 95,000 19,000 200,000 530,000 P 60,000 41,000 20,000 6,000 28,000 95,000 P(15,000) 110,000 40,000 7,000 100,000 257,000 P 43,000 65,000 35,000 6,000 72,000 178,000 P 32,000 * A common fixed cost that is allocated on the basis of sales pesos.

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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Problem 2 (Eliminate or Retain a Product Line) Crystal Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data on sales and expenses for the past month follow: Trampoline Rectangular Octagonal P500,000. P360,000 200,000 300,000 Total Round P140,000 60,000 80,000 Sales.. Less variable expenses. Contribution margin Less fixed expenses: Advertising – traceable. Depreciation of special equipment Line supervisors' salaries.. General factory overhead* Total fixed expenses Net operating income (loss) P1,000,000 410,000 590,000 150,000 210,000 216,000 95,000 19,000 200,000 530,000 60,000 41,000 20,000 6,000 28,000 95,000 P(15,000) 110,000 40,000 7,000 100,000 257,000 P 43,000 65,000 35,000 6,000 72,000 178,000 P 32,000 A common fixed cost that is allocated on the basis of sales pesos.
Transcribed Image Text:Problem 2 (Eliminate or Retain a Product Line) Crystal Sports Equipment manufactures round, rectangular, and octagonal trampolines. Data on sales and expenses for the past month follow: Trampoline Rectangular Octagonal P500,000. P360,000 200,000 300,000 Total Round P140,000 60,000 80,000 Sales.. Less variable expenses. Contribution margin Less fixed expenses: Advertising – traceable. Depreciation of special equipment Line supervisors' salaries.. General factory overhead* Total fixed expenses Net operating income (loss) P1,000,000 410,000 590,000 150,000 210,000 216,000 95,000 19,000 200,000 530,000 60,000 41,000 20,000 6,000 28,000 95,000 P(15,000) 110,000 40,000 7,000 100,000 257,000 P 43,000 65,000 35,000 6,000 72,000 178,000 P 32,000 A common fixed cost that is allocated on the basis of sales pesos.
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.
Transcribed Image Text: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.
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