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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

FINANCIAL ACCOUNTING
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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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: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
* 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
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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