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Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? 135,150 ✓ For the plank line? 63,900 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✔ by $ 10,000 X

Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip Plank Parquet Total $394,000 $201,000 $285,000 $880,000 235,000 130,000 260,000 625,000 $159,000 $71,000 $25,000 $255,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation Segment margin Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $25,000 (sales of $285,000 less total variable costs of $260,000). All variable costs are relevant. (7,000) (28,000) (26,000) (61,000) (15,000) (10,000) (5,000) (30,000) (38,500) (11,000) (27,500) (77,000) $98,500 $22,000 $(33,500) $87,000 Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? 135,150 ✓ For the plank line? 63,900 2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much? Keep ✔ by $ 10,000 X

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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**Segmented Income Statement for Hickory Company's Wooden Flooring Product Lines** Here's a segmented income statement detailing the financial performance of Hickory Company's three wooden flooring product lines: Strip, Plank, and Parquet. **Income Statement:** | | Strip | Plank | Parquet | Total | | -------------------- | ------------- | ------------ | ------------ | ------------- | | Sales revenue | $394,000 | $201,000 | $285,000 | $880,000 | | Less: Variable expenses | 235,000 | 130,000 | 260,000 | 625,000 | | Contribution margin | $159,000 | $71,000 | $25,000 | $255,000 | | Less: Direct fixed expenses | | | | | | Machine rent | (7,000) | (28,000) | (26,000) | (61,000) | | Supervision | (15,000) | (10,000) | (5,000) | (30,000) | | Depreciation | (38,500) | (11,000) | (27,500) | (77,000) | | Segment margin | $98,500 | $22,000 | $(33,500) | $87,000 | **Management Decision on Parquet Product Line:** Hickory's management is evaluating whether to continue or drop the Parquet product line. The Parquet product line currently has a contribution margin of $25,000 (with sales of $285,000 and total variable costs of $260,000). All variable costs are relevant. **Relevant Fixed Costs:** - 70% of the machine rent for Parquet is relevant. - All supervision salaries for Parquet are relevant. - Dropping the Parquet product line is assumed to reduce sales of the Strip line by 15% and sales of the Plank line by 10%. All other factors remain the same. **Data and Analysis:** The financial data is available through a Microsoft Excel Online file. Analyze the data in the spreadsheet, perform the necessary calculations, and input your answers to the questions below. **Required Analysis:** 1. **Contribution Margin Post-Drop:
Transcribed Image Text:**Segmented Income Statement for Hickory Company's Wooden Flooring Product Lines** Here's a segmented income statement detailing the financial performance of Hickory Company's three wooden flooring product lines: Strip, Plank, and Parquet. **Income Statement:** | | Strip | Plank | Parquet | Total | | -------------------- | ------------- | ------------ | ------------ | ------------- | | Sales revenue | $394,000 | $201,000 | $285,000 | $880,000 | | Less: Variable expenses | 235,000 | 130,000 | 260,000 | 625,000 | | Contribution margin | $159,000 | $71,000 | $25,000 | $255,000 | | Less: Direct fixed expenses | | | | | | Machine rent | (7,000) | (28,000) | (26,000) | (61,000) | | Supervision | (15,000) | (10,000) | (5,000) | (30,000) | | Depreciation | (38,500) | (11,000) | (27,500) | (77,000) | | Segment margin | $98,500 | $22,000 | $(33,500) | $87,000 | **Management Decision on Parquet Product Line:** Hickory's management is evaluating whether to continue or drop the Parquet product line. The Parquet product line currently has a contribution margin of $25,000 (with sales of $285,000 and total variable costs of $260,000). All variable costs are relevant. **Relevant Fixed Costs:** - 70% of the machine rent for Parquet is relevant. - All supervision salaries for Parquet are relevant. - Dropping the Parquet product line is assumed to reduce sales of the Strip line by 15% and sales of the Plank line by 10%. All other factors remain the same. **Data and Analysis:** The financial data is available through a Microsoft Excel Online file. Analyze the data in the spreadsheet, perform the necessary calculations, and input your answers to the questions below. **Required Analysis:** 1. **Contribution Margin Post-Drop:
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