Product-Line Earnings Statements(Dollar amounts are in thousands)Annual Costs of Operating EachAnagen CatagenLusterTotalProduct Line450,000900,000450,000 225.000 1,125,000900,000 450,000 2,250,000Sales in unitsSales in dollarsUnit-level costs:Cost of production85,50011,70020,2506,750124,20085,50011,70018,0004,500119,70046,2006,0009,0002,25063,450217,20029,40047,25013,500307,350Sales commissionsShipping and handlingMiscellaneousTotal unit-level costsProduct-level costs:Supervisors' salariesFacility-level costs:9,6007,2002,40019,200100,000112,500100,000112,500400,00022,500635,000768,80050,00056,250400,000 200,000 1,000,00011,250635,000 317,500 1,587,500761,900 383,350 1,914,050$131,200 $138,100 | $66,650 | $335,950250,000281,250RentUtilitiesDepreciation on equipmentAllocated companywide expensesTotal facility-level costsTotal product costProfit on products22,50056,250 Real-world companies often seek to reduce the complexity of their operations in anattempt to increase profits. In 2012, Procter & Gamble (P&G) believed it couldincrease the company's profits by eliminating some product-lines. In 2017, P&Gannounced that it had "divested, discontinued, or consolidated 105 brands". As aresult, even though its sales had decreased by 22 percent from 2012 to 2017, itsprofit as a percentage of sales had increased by 55 percent. Other companies havealso tried to improve their financial performance by downsizing. In November 2017,General Electric announced it would begin a downsizing operation that would resultin their exiting business using over $20 billion in assets in the next one to two years.In January 2018, Newell Brands, the company whose products include Tupperware,Sharpie pens,Elmer's Glue, and Rawlings sports products, announced it would bereducing its product offerings to the extent that it would close half of its facilitiesand reduce it revenues by 20 percent.Requireda. Identify some cost savings these companies might realize by reducing the numberof items they sell or use in production. Be as specific as possible and use yourimagination.b. Consider the additional information presented as follows, which is hypothetical.All dollar amounts are in thousands; unit amounts are not. Assume that P&Gdecides to eliminate one shampoo line, Luster, for one of its segments thatcurrently produces three products. As a result, the following are expected to occur.C.(1) The number of units sold for the segment is expected to drop by only 125,000because of the elimination of Luster, since most customers are expected topurchase an Anagen or Catagen product instead. The shift of sales from Luster toAnagen and Catagen is expected to be evenly split. In other words, the sales ofAnagen and Catagen will each increase by 50,000 units.(2) Rent is paid for the entire production facility, and the space used by Lustercannot be sublet.(3) Utilities costs are expected to be reduced by $40,000.(4) All of the supervisors for Luster were terminated. No new supervisors will behired for Anagen or Catagen.(5) Half of the equipment being used to produce Luster is also used to produce theother two products and its depreciation cost must be absorbed by them. Theremaining equipment has a book-value of $340,000 and can be sold for only$60,000.(6) Facility-level costs will continue to be allocated between the product lines basedon the number of units produced.Prepare revised product-line earnings statements based on the elimination ofLuster. (Hint: It will be necessary to calculate some per-unit data to accomplishthis).

Name: Product-Line Earnings Statements (Dollar amounts are in thousands) Annual Costs of Operating Each Anagen Catagen Luster Total Product Line 450,000 900,000 450,000 225,000 1,125,000…
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Product-Line Earnings Statements (Dollar amounts are in thousands) Annual Costs of Operating Each Anagen Catagen Luster Total Product Line 450,000 900,000 450,000 225,000 1,125,000 900,000 450,000 2,250,000 Sales in units Sales in dollars Unit-level costs: Cost of production 85,500 11,700 20,250 6,750 124,200 85,500 11,700 18,000 4,500 119,700 46,200 6,000 9,000 2,250 63,450 217,200 29,400 47,250 13,500 307,350 Sales commissions Shipping and handling Miscellaneous Total unit-level costs Product-level costs: Supervisors' salaries Facility-level costs: 9,600 7,200 2,400 19,200 100,000 112,500 Rent 100,000 112,500 400,000 22,500 635,000 768,800 50,000 56,250 400,000 200,000 1,000,000 11,250 635,000 317,500 1,587,500 761,900 383,350 1,914,050 $131,200 $138,100 | $66,650 | $335,950 250,000 281,250 Utilities Depreciation on equipment Allocated companywide expenses Total facility-level costs Total product cost Profit on products 22,500 56,250

Product-Line Earnings Statements (Dollar amounts are in thousands) Annual Costs of Operating Each Anagen Catagen Luster Total Product Line 450,000 900,000 450,000 225,000 1,125,000 900,000 450,000 2,250,000 Sales in units Sales in dollars Unit-level costs: Cost of production 85,500 11,700 20,250 6,750 124,200 85,500 11,700 18,000 4,500 119,700 46,200 6,000 9,000 2,250 63,450 217,200 29,400 47,250 13,500 307,350 Sales commissions Shipping and handling Miscellaneous Total unit-level costs Product-level costs: Supervisors' salaries Facility-level costs: 9,600 7,200 2,400 19,200 100,000 112,500 Rent 100,000 112,500 400,000 22,500 635,000 768,800 50,000 56,250 400,000 200,000 1,000,000 11,250 635,000 317,500 1,587,500 761,900 383,350 1,914,050 $131,200 $138,100 | $66,650 | $335,950 250,000 281,250 Utilities Depreciation on equipment Allocated companywide expenses Total facility-level costs Total product cost Profit on products 22,500 56,250

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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