Segmented Income Statement, Management Decision Making FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: Scented Musical Regular Total Sales $ 10,000 $15,000 $25,000 $50,000 Less: Variable expenses 7,000 12,000 12,500 31,500 Contribution margin $ 3,000 $ 3,000 $12,500 $18,500 Less: Direct fixed expenses 4,000 5,000 3,000 12,000 Segment margin $ (1,000) $ (2,000) $ 9,500 $ 6,500 Less: Common fixed expenses 7,500 Operating income (loss) $(1,000) Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is seriously considering dropping both the scented and musical product lines. However, before making a final decision, she consults Jim Dorn, FunTime's vice president of marketing. Required: 1. Jim believes that by increasing advertising by $1,000 ($250 for the scented line and $750 for the musical line), sales of those two lines would increase by 30%. Prepare segmented income statements based on Jim's assumptions. Note: Enter all amounts as positive numbers except subtotals, if applicable.

Segmented Income Statement, Management Decision Making FunTime Company produces three lines of greeting cards: scented, musical, and regular. Segmented income statements for the past year are as follows: Scented Musical Regular Total Sales $ 10,000 $15,000 $25,000 $50,000 Less: Variable expenses 7,000 12,000 12,500 31,500 Contribution margin $ 3,000 $ 3,000 $12,500 $18,500 Less: Direct fixed expenses 4,000 5,000 3,000 12,000 Segment margin $ (1,000) $ (2,000) $ 9,500 $ 6,500 Less: Common fixed expenses 7,500 Operating income (loss) $(1,000) Kathy Bunker, president of FunTime, is concerned about the financial performance of her firm and is seriously considering dropping both the scented and musical product lines. However, before making a final decision, she consults Jim Dorn, FunTime's vice president of marketing. Required: 1. Jim believes that by increasing advertising by $1,000 ($250 for the scented line and $750 for the musical line), sales of those two lines would increase by 30%. Prepare segmented income statements based on Jim's assumptions. Note: Enter all amounts as positive numbers except subtotals, if applicable.

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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Keep-or-Drop Decision Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Boyne Conway $270 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Depreciation Salaries Alanson $1,280 $185 1,115 $165 50 95 $20 45 $140 15 85 $40 216 $54 12 100 $(58) Total $1,735 1,376 $359 77 280 $2 Segment margin Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that each of the three products has a different supervisor whose position would be eliminated if the associated product were dropped. Required: Conceptual Connection: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15".
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