Horngren's Accounting (11th Edition)
11th Edition
ISBN: 9780133856781
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 25, Problem P25.23APGA
Making Decisions a product decisions
Members of the board of directions of safety Step have received the following operating income data for the year ended may 31, 2016.
Members of board are surprised that the industrial systems product line not profitable. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial system will decrease fixed cost of goods sold by $84,000 and decrease fixed selling and administrative expenses by $11,000
Requirements
l. Prepare a differential analysis to show whether Safety drop the Industrial systems product line.
2. Prepare contribution margin income statements to show Safety Step's total operating income under the alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the two alternative’s income numbers to your answer Requirement 1.
3. What have you learned from the comparison in Requirement 2?
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Making decisions about dropping a product
Members of the board of directors of Security Team have received the following operating income data for the year ended March 31, 2018:
Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $81,000 and decrease fixed selling and administrative expenses by $15,000.
Requirements
Prepare a differential analysis to show whether Security Team should drop the industrial systems product line.
Prepare contribution margin income statements to show Security Team’s total operating income under the two alternatives: (a) with the industrial systems line and without the line. Compare the difference between the two alternatives’ income numbers to your answer to Requirement l.
What have you learned from this comparison in Requirement 2?
Making dropping a product or segment decisions
Edna Fashions operates three departments: Men’s, Women’s and Accessories Depart mental operating income data for the third quarter of 2018 are as follows:
Assume that the fixed costs assigned to each department include only direct fixed costs of the department:
• Salary of the department’s manager
• Cost of advertising directly related to that department
If Edna Fashions drops a department, it will not incur these fixed costs Under these circumstances, should Edna Fashions drop any of the departments? Give your reasoning
Making dropping a product decisions
Members of the board of directors of Control One have received the following operating income data for the year ended March 31, 2021:
CONTROL ONE
Income Statement
For the Month Ended March 31, 2021
Product Line
Industrial
Household
Systems
Systems
Total
Sales Revenue
$ 330,000
$ 370,000
$ 700,000
Cost of Goods Sold:
Variable
33,000
47,000
80,000
Fixed
240,000
69,000
309,000
Total Cost of Goods Sold
273,000
116,000
389,000
Gross Proft
57,000
254,000
311,000
Selling and Administrative Expenses:
Variable
64,000
73,000
137,000
Fixed
39,000
27,000
66,000
Total Selling and Administrative E
103,000
100,000
203,000
Operating Income (Loss)
$ (46,000)
$ 154,000
$ 108,000
Chapter 25 Solutions
Horngren's Accounting (11th Edition)
Ch. 25 - Prob. 1QCCh. 25 - Prob. 2QCCh. 25 - Which of the following costs are irrelevant to...Ch. 25 - Prob. 4QCCh. 25 - Prob. 5QCCh. 25 - 6. When companies are price-setters, their...Ch. 25 - Prob. 7QCCh. 25 - Prob. 8QCCh. 25 - Prob. 9QCCh. 25 - Prob. 10QC
Ch. 25 - Prob. 1RQCh. 25 - Prob. 2RQCh. 25 - Prob. 3RQCh. 25 - Prob. 4RQCh. 25 - Prob. 5RQCh. 25 - What is differential analysis?Ch. 25 - Prob. 7RQCh. 25 - Prob. 8RQCh. 25 - Prob. 9RQCh. 25 - Prob. 10RQCh. 25 - Prob. 11RQCh. 25 - Prob. 12RQCh. 25 - Prob. 13RQCh. 25 - Prob. 14RQCh. 25 - Prob. 15RQCh. 25 - Prob. 16RQCh. 25 - Prob. 17RQCh. 25 - Prob. 18RQCh. 25 - Prob. 19RQCh. 25 - Prob. 20RQCh. 25 - Prob. 21RQCh. 25 - Prob. 22RQCh. 25 - Prob. 23RQCh. 25 - Prob. 24RQCh. 25 - Prob. 25RQCh. 25 - Prob. 26RQCh. 25 - Prob. S25.1SECh. 25 - Prob. S25.2SECh. 25 - Prob. S25.3SECh. 25 - Prob. S25.4SECh. 25 - Prob. S25.5SECh. 25 - Prob. S25.6SECh. 25 - Prob. S25.7SECh. 25 - Prob. S25.8SECh. 25 - Prob. E25.9ECh. 25 - Prob. E25.10ECh. 25 - Prob. E25.11ECh. 25 - Prob. E25.12ECh. 25 - Prob. E25.13ECh. 25 - Prob. E25.14ECh. 25 - Prob. E25.15ECh. 25 - Prob. E25.16ECh. 25 - Prob. E25.17ECh. 25 - Making outsourcing decisions Eclipse Systems...Ch. 25 - Prob. E25.19ECh. 25 - Prob. E25.20ECh. 25 - Prob. P25.21APGACh. 25 - Prob. P25.22APGACh. 25 - Making Decisions a product decisions Members of...Ch. 25 - Prob. P25.24APGACh. 25 - Prob. P25.25APGACh. 25 - Prob. P25.26APGACh. 25 - Prob. P25.27BPGBCh. 25 - Prob. P25.28BPGBCh. 25 - Prob. P25.29BPGBCh. 25 - Prob. P25.30BPGBCh. 25 - Making outsourcing decisions Winter Sports...Ch. 25 - Prob. P25.32BPGBCh. 25 - Prob. P25.33CPCh. 25 - Prob. 25.1EI
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