Richard is the operating manager of Sheridan, a company that manufactures three different types of all-terrain vehicles: four- wheelers, personal watercraft, and snowmobiles. Naturally, Richard has the opportunity to test all of these products for quality- control purposes. At the end of the year, Richard needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Sales Costs Four-Wheelers IT hours $1,132,000 Number of employees Maintenance hours Personal Watercraft Payroll $94,000 2 100 150 $1,399,000 Maintenance $116,000 3 200 40 Snowmobiles $1,988,000 IT $248,000 4 150 220 Four-Wheelers Watercraft $843,000 $1,143,000 20 1,800 800 18 750 1.250 Snowmobiles $1,742,000 27 1,300 900
Richard is the operating manager of Sheridan, a company that manufactures three different types of all-terrain vehicles: four- wheelers, personal watercraft, and snowmobiles. Naturally, Richard has the opportunity to test all of these products for quality- control purposes. At the end of the year, Richard needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Sales Costs Four-Wheelers IT hours $1,132,000 Number of employees Maintenance hours Personal Watercraft Payroll $94,000 2 100 150 $1,399,000 Maintenance $116,000 3 200 40 Snowmobiles $1,988,000 IT $248,000 4 150 220 Four-Wheelers Watercraft $843,000 $1,143,000 20 1,800 800 18 750 1.250 Snowmobiles $1,742,000 27 1,300 900
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Richard is the operating manager of Sheridan, a company that manufactures three different types of all-terrain vehicles: four-
wheelers, personal watercraft, and snowmobiles. Naturally, Richard has the opportunity to test all of these products for quality-
control purposes.
At the end of the year, Richard needs to perform a profitability analysis for each product line to better evaluate the company's pricing
strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see
what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three
support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance
hours used, and IT hours used, respectively.
Sales
Costs
Four-Wheelers
IT hours
$1,132,000
Number of employees
Maintenance hours
Personal Watercraft
Payroll
$94,000
2
100
150
$1,399,000
Maintenance
3
200
Snowmobiles
$116,000 $248,000
40
$1,988,000
IT
4
150
220
Four-Wheelers Watercraft
$843,000
20
1,800
800
$1,143,000
18
750
1,25
Snowmobiles
$1,742,000
27
1,300
900
Transcribed Image Text:* Your answer is incorrect.
Use Excel to allocate the three support department costs to the three product lines using the reciprocal method. (Round answers to
2 decimal places, e.g. 15.25.)
4-Wheelers
983222.65
eTextbook and Media
LA
Operating Units
Watercraft
1286445.63
LA
Snowmobiles
1885113.29
LA
Total
4154781.57
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