Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costingincome statement for the company for the last quarter is given below:SalesCost of goods soldGross marginSelling and administrative expenses:Selling expensesAdministrative expensesTotal expensesNet operating income (loss)Selling expenses:Sales salariesDirect advertisingGeneral advertising*Store rentDepreciation of store fixturesDelivery salariesDepreciation of delivery equipmentTotal selling expensesSuperior Markets, IncorporatedIncome StatementFor the Quarter Ended September 30Total$ 3,240,0001,789,7761,450,224Administrative expenses:Store managers' salariesGeneral office salaries*Insurance on fixtures and inventoryUtilitiesEmployment taxesGeneral office-other*882,360413,6401,296,000$ 154,224Total administrative expenses*Allocated on the basis of sales dollars.a. The breakdown of the selling and administrative expenses that are shown above is as follows:The North Store has consistently shown losses over the past two years. For this reason, management is givingconsideration to closing the store. The company has asked you to make a recommendation as to whether the storeshould be closed or kept open. The following additional information is available for your use:Total$ 258, 120201,96048,600324,00017,28022,6809,720$ 882,360North Store$ 777,600435,456342,144Total249,912114,480364, 392$ (22,248)$ 75,60054,00027,000114,48061,56081,000$ 413,640South Store$ 1,296,000712,800583,200340,200162,972503,172$ 80,028North StoreNorth Store South Store$75,60055,08011,66491,8004,9687,5603,240$ 249,912$ 22,68012,9608,10033,48017,82019,440$ 114,480$ 96,12077,76019,440129,6006,4807,5603,240$ 340,200South StoreEast Store$ 1,166,400641,520524,880$ 32,40021,6009,72043,20023,65232,400$ 162,972292,248136,188428,436$ 96,444East Store$ 86,40069,12017,496102,6005,8327,5603,240$ 292,248East Store$ 20,52019,4409,18037,80020,08829,160$ 136,188b. The lease on the building housing the North Store can be broken with no penalty.c. The fixtures being used in the North Store would be transferred to the other two stores if the North Store wereclosed.d. The general manager of the North Store would be retained and transferred to another position in the company if theNorth Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at asalary of $11,880 per quarter. The general manager of the North Store would continue to earn her normal salary of$12,960 per quarter. All other managers and employees in the North store would be discharged.e. The company has one delivery crew that serves all three stores. One delivery person could be discharged if theNorth Store were closed. This person's salary is $4,320 per quarter. The delivery equipment would be distributed tothe other stores. The equipment does not wear out through use, but does eventually become obsolete.f. The company pays employment taxes equal to 15% of their employees' salaries.g. One-third of the insurance in the North Store is on the store's fixtures.h. The "General office salaries" and "General office-other" relate to the overall management of Superior Markets,Incorporated If the North Store were closed, one person in the general office could be discharged because of thedecrease in overall workload. This person's compensation is $6,480 per quarter. Required:1. How much employee salaries will the company avoid if it closes the North Store?2. How much employment taxes will the company avoid if it closes the North Store?3. What is the financial advantage (disadvantage) of closing the North Store?4. Assuming that the North Store's floor space can't be subleased, would you recommend closing the North Store?5. Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions.First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strongcustomer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increasedsales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yieldthe same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, whatis the financial advantage (disadvantage) of closing the North Store?Complete this question by entering your answers in the tabs below.Required 1 Required 2 Required 3 Required 4How much employee salaries will the company avoid if it closes the North Store?Employee salariesRequired 1 Required 2 Required 3What is the financial advantage (disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.)Financial advantage (disadvantage)Required 1 Required 2Required 3Required 5Required 4Financial advantage (disadvantage)Required 5Required 4 Required 5Assume that the North Store's floor space can't be subleased. However, let's introduce three more assumptions. First, assumethat if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty toSuperi Markets. Second, assum that the East Store has enough capacity to handle the increased sales that would arisefrom closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as apercentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage(disadvantage) of closing the North Store? (Enter any "disadvantages" as a negative value.)Show less

Financial advantage { disadvantage } shows the net increase or decrease of operating profit due to…

Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Sales Cost of goods sold Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total $ 3,240,000 1,789,776 1.450 224 North Store $777,600 435,456 743 144 South Store $ 1,296,000 712,800 50 200 East Store $ 1,166,400 641,520 50.000

Superior Markets, Incorporated, operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below: Sales Cost of goods sold Superior Markets, Incorporated Income Statement For the Quarter Ended September 30 Total $ 3,240,000 1,789,776 1.450 224 North Store $777,600 435,456 743 144 South Store $ 1,296,000 712,800 50 200 East Store $ 1,166,400 641,520 50.000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The following information is available for Barnes Company for the fiscal year ended December 31: Beginning finished goods inventory in units Units produced Units sold Sales 0 8,600 5,900 $ 767,000 $ 172,000 $ 86,000 Materials cost Variable conversion cost used Fixed manufacturing cost Indirect operating costs (fixed) $ 946,000 $ 118,000 The difference between the variable costing ending inventory and the absorption costing ending inventory is: Multiple Choice O 2,700 units times $115 per unit variable conversion cost plus $110 per unit fixed manufacturing cost 4 2,700 units times $115 per unit variable conversion cost plus $110 per unit fixed manufacturing cost plus $111.67 per unit indirect operating c 2,700 units times $105 per unit materials cost
Fanelli Corporation, a merchandising company, reported the following results for July: Number of units sold 6,400 Selling price per unit $| 600 Unit cost of goods sold $ 416 Variable selling expense per unit $ | 56 Total fixed selling expense $ 125,900 Variable administrative expense per unit | $| 24 Total fixed administrative expense $| 207,800 Cost of goods sold is a variable cost in this company. Required: a. Prepare a traditional format income statement for July. b. Prepare a contribution format income statement for July.
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,360,000 1,375,000 2,985,000 2,220,000 $ 765,000 Department Hardware $ 3,160,000 962,000 2,198,000 1,320,000 $ 878,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,200,000 413,000 787,000 900,000 $ (113,000) A study indicates that $371,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 13% decrease in the sales of the Hardware Department.
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At year-end, the company reported the following income statement information using absorption costing. Sales (800 × $1,050) $ 840,000 Cost of goods sold (800 × $450) 360,000 Gross profit 480,000 Selling and administrative expenses 220,000 Income $ 260,000 Additional Information a. Product cost per kayak under absorption costing totals $450, which consists of $350 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $105,000 of fixed overhead per year divided by 1,050 kayaks produced.b. The $220,000 in selling and administrative expenses consists of $85,000 that is variable and $135,000 that is fixed.Prepare an income statement for the current year under variable costing.
Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @ P33.75) Cost of goods manufactured (50,000 units @ 21) P1,050,000.00 Ending Inventory (10,000 units @ 21) Selling & administrative expenses Net Operating Income P1,350,000.00 P 210,000.00 P 420,000.00 P 90,000.00 The company's selling and administrative expenses consists of P300,000 per year in fixed expenses and P3.00 per unit sold in variable expenses. The product cost of P21 is computed as follows: Direct materials - P10.00; Direct labor – P4.00; Variable manufacturing overhead – P2.00; Fixed manufacturing overhead (P250,000/50,000 units) -P5.00. Compute for the operating income under variable costing.
2 Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Income Statement (Absorption Costing) Sales (80,000 units × $45 per unit) $ 3,600,000 Cost of goods sold 2,000,000 Gross profit 1,600,000 Selling and administrative expenses 560,000 Income $ 1,040,000 Additional Information Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. The company's product cost of $25 per unit consists of the following. Direct materials $ 4 per unit Direct labor $ 10 per unit Variable overhead $ 4 per unit Fixed overhead ($700,000 / 100,000 units) $ 7 per unit Required:Prepare an income statement for the company under variable costing.
Kenzi...
Whitman Company has just completed its first year of operations. The company's traditional format income statement for the year follows: Whitman Company Income Statement Sales (35,000 units × $25 per unit) Cost of goods sold (35,000 units × $15 per unit) Gross margin Selling and administrative expenses Net operating income Amount $ 875,000 525,000 350,000 278,000 $ 72,000 The company's selling and administrative expenses consist of $208,000 per year in fixed expenses and $2 per unit sold in variable expenses. The $15 unit product cost given above is computed as follows: Direct materials Direct labor Variable overhead Fixed overhead ($100,000 ÷ 50,000 units) Unit product cost (under traditional costing) $ 6 6 1 2 $15 Required: 1. Prepare a contribution format income statement for the year ended December 31. 2. What was the contribution toward fixed expenses and profits for each unit sold? (State this figure in a single dollar amount per snowboard.) 3. What would operating income be if…
Nato Company was organized a year ago. The results of the company's first year of operations using the absorption costing method follow: Sales (40,000 units @P33.75), P 1,350,000; Cost of goods manufactured (50,000 units @ 21), p 1,050,000; Ending inventory (10,000 units @ 21), P_210,000; Selling & administrative expenses, P420,000; Net Operating income, P90,000. The company's selling and administrative expenses consists of P300,000 per year in fixed expenses and P3.00 per unit sold in variable expenses. The product cost of P21 is computed as follows: Direct materials - P10.00; Direct labor - P4.00; Variable manufacturing overhead - P2.00; Fixed manufacturing overhead (P250,000/50,000 units) –P5.00. Compute for the operating income under variable costing.
Darby Company, operating at full capacity, sold 129,600 units at a price of $123 per unit during the current year. Its income statement is as follows: Sales $15,940,800 Cost of goods sold 5,658,000 Gross profit $10,282,800 Expenses: Selling expenses $2,829,000 Administrative expenses 1,681,000 Total expenses 4,510,000 Income from operations $5,772,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $1,476,000 in yearly sales. The expansion will increase fixed costs by $196,800, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs $fill in the blank 1…
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,000 kayaks and sold 750 at a price of $1,000 each. At year-end, the company reported the following income statement information using absorption costing. Sales (750 x $1,000) Cost of goods sold (750 x $425) Gross profit Selling and administrative expenses Income Additional Information $ 750,000 318,750 431,250 240,000 $ 191,250 a. Product cost per kayak under absorption costing totals $425, which consists of $325 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $100,000 of fixed overhead per year divided by 1,000 kayaks produced. b. The $240,000 in selling and administrative expenses consists of $95,000 that is variable and $145,000 that is fixed. Prepare an income statement for the current year under variable costing. Income KENZI Income Statement (Variable Costing)
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (40,000 units x $44.60 per unit) Cost of goods sold (40,000 units x $22 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,784,000 880,000 904,000 460,000 $ 444,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $22 unit product cost given above is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($180,000 + 45,000 units) Absorption costing unit product cost Required: $ 10 5 3 4 $ 22 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…