ookrintrencesMcGrawHillQ4NLamothe 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, and54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has beenlooking at the segmented income statement for the fan and is concerned about the results for the 36-inch model.RevenuesVariable costsFixed costs allocated to productsOperating profit (loss)13,532If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, thecompany's total fixed costs would be reduced by 25 percent.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?2Required AComplete this question by entering your answers in the tabs below.WSPrepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping StatusQuo as the base. Select "none" if there is no effect.)XgcommandRequired B92#3EDStatus QuoC$4OCT 136 Inch$ 360,800225,600141, 230$ (6,030)19RFAlternative:Drop16do 5%44 Inch$ 561,800279,680219,464$ 62,656V"0"TG< Prev6Difference54 Inch$ 339,600157,500132,806$ 49,294B8 of 12tvMacBook ProYHS&7UNNext >* 008J|M(9KW..li0IH0EPICGAMESLP>DOCXSave & Exit{Check+ 11[Icommand option?

Differential analysis considers both variable and fixed costs when comparing two or more…

Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141, 230 $ (6,030) 44 Inch $ 561,800 279,680 219,464 $ 62,656 54 Inch $ 339,600 157,500 132,806 $ 49,294

Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $360,800 225,600 141, 230 $ (6,030) 44 Inch $ 561,800 279,680 219,464 $ 62,656 54 Inch $ 339,600 157,500 132,806 $ 49,294

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 9E: GrillMaster Inc. sells an industry-leading line of outdoor charcoal and gas grills to customers...

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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 $ 376,000 233,600 149, 230 $ (6,830) 44 Inch $ 578,600 287,680 227,464 $ 63,456 54 Inch $ 356,400 165,500 140, 806 $ 50,094 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. Prepare a differential cost schedule to support your…
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 $ 372,200 231,600 147,230 $ (6,630) 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…
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Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company’s best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $80. The Glass Division sells its finished windows for $190. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows: Frame Division Glass Division Direct material $ 15 $ 30 * Direct labor 20 15 Variable overhead 30 30 Total $ 65 $ 75 *Not including the transfer price for the frame. Assume that there is no excess capacity in the Frame Division. Required: 1-a. Use the general rule to compute the transfer price for window frames. 1-b. Calculate the…
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Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Cost Pool Activity Rates Supporting manufacturing $ 2 per direct labour-hour Order processing $ 12 per order Customer service $ 53 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Model Deluxe Model Number of cases 120 20 Number of orders 5 2 Direct labour-hours per case 0.25 0.40 Selling price per case $ 32 $ 52 Direct materials cost per case $ 9 $ 12 The company’s direct labour rate is $12 per hour. Required: Using the company’s ABC system, compute the customer margin…
GrillMaster Inc. sells an industry-leading line of outdoor charcoal and gas grills to customers through its online store as well as national home improvement stores. While the majority of the companys grills is mass produced, the company also provides custom grill products as part of its high-end line of products. Three independent scenarios are described below. a. GrillMaster Inc. agrees to provide an outdoor gas grill, replacement parts, and installation of the grill to a customer as part of its Get Ready for Summer promotion. The replacement parts and installation services are available from other vendors. b. GrillMaster agrees to provide a custom gas grill and replacement parts to a customer utilizing a proprietary grilling technology. Due to the proprietary nature of the product, no other vendor sells either product. The grill is delivered on April 1, 2019, and the replacement parts are delivered in the following month. c. Assume the same facts as in b, but because of production delays, GrillMaster delivers the replacement parts prior to delivery of the grill. Required: List each performance obligation in the contract.
Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Number of cases Number of orders. Direct labour-hours per case Selling price per case. Direct materials cost per case Sales Costs: Direct materials Direct labour Supporting manufacturing Order processing Customer service The company's direct labour rate is $30 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City. Customer margin Standard Model 290 5 0.25 $49 $ 26 70 Deluxe Model 105 2 $ 0.40 $ 69 $29 70 (70)
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