Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 7, Problem 11E
Segmented Income Statement L07—4
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recentmonthly contribution format income statement:
In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, theAccounting Department has developed the following information:
Required:
1. Prepare a contribution format income statement segmented by divisions.
2. The Marketing Department has proposed increasing the West Division’s monthly advertising by $1 5:000 based on the belief that it wouldincrease that division’s sales by 20%. Assuming these estimates are accurate, how much would the Company’s net operating incomeincrease (decrease) if the proposal is implemented?
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Students have asked these similar questions
CVP Application Problem 4: Segmented Income Statements — Costs of Activities
Hunter, Inc., manufactures and distributes three principal product lines: sporting goods, housewares, and hardware. The company has suffered reduced profitability in the past few quarters, and the top managers have taken a number of actions to try to improve the situation. The most recent quarterly income statement, segmented by product line, follows. Indirect, common fixed costs are allocated to the lines based on relative sales or labor content.
Hunter, Inc.Income Statement, Second Quarter(in thousands of dollars)
Total
Sporting Goods
Housewares
Hardware
Sales
$3,337.0
$650.0
$921.0
$1,766.0
Cost of Sales
$1,928.8
$357.3
$545.7
$1,025.8
Gross Margin
$1,408.2
$292.7
$375.3
$ 740.2
Operating Expenses:
Selling Expenses
$ 787.6
$157.1
$225.9
$ 404.6
Administrative Expenses
$514.6
$94.2
$135.6
$284.8
Total Operating Expenses
$1,302.2
$251.3
$361.5
$ 689.4
Income Before Taxes
$ 106.0…
Homework
1
In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the
Accounting Department provided the following information:
Sales
Variable expenses as a percentage of sales.
Traceable fixed expenses
Required 1
Required 2A Required 28.
Complete this question by entering your answers in the tabs below.
Net operating income will
East
$ 392,000
Required:
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department believes increasing the West Division's monthly advertising by $28,000 will increase that division's
sales by 16%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the
proposal is implemented?
2-b. Would you recommend the increased advertising?
increase
52%
by
$ 299,000
Empire Records divides its operations into three divisions. The company CEO noticed that its North American division is under
performing and is trying to decide if this division should be eliminated. A recent income statement for its North American division is as
follows:
Empire Records
North American Division
Income Statement
Revenue
Divisions sales commissions
Salary of the division president
Lease cost for division retail stores
Allocation of company-wide legal cost*
Net loss
*This cost relates to a legal settlement paid by Empire Records during the year.
Required:
a. Prepare an income statement containing only the relevant information to the segment elimination decision.
b. Based on the income statement you prepared in Requirement a, should this division be eliminated?
Complete this question by entering your answers in the tabs below.
Required A Required B
$570,000
(353,000)
(25,700)
(119,000)
(77,000)
(4,700)
Prepare an income statement containing only the relevant information to…
Chapter 7 Solutions
Introduction To Managerial Accounting
Ch. 7 - What is the difference between absorption costing...Ch. 7 - Are selling and administrative expenses treated as...Ch. 7 - Explain how fixed manufacturing overhead costs are...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - What are the arguments in favor of treating fixed...Ch. 7 - Prob. 6QCh. 7 - If the units produced exceed the units sold, which...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - How does Lean Production reduce or eliminate the...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Distinguish between a traceable fixed cost and a...Ch. 7 - Explain how the contribution margin differs from...Ch. 7 - Why aren’t common fixed costs allocated to...Ch. 7 - How is it possible for a fixed cost that ¡s...Ch. 7 - Should a company allocate its common fixed costs...Ch. 7 - Prob. 1AECh. 7 - Prob. 2AECh. 7 - Prob. 3AECh. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 2F15Ch. 7 - Prob. 3F15Ch. 7 - Prob. 4F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 6F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 8F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 10F15Ch. 7 - Prob. 11F15Ch. 7 - Prob. 12F15Ch. 7 - Prob. 13F15Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Diego Company manufactures one product that is...Ch. 7 - Prob. 1ECh. 7 - Variable Costing Income Statement; Explanation of...Ch. 7 - Reconciliation of Absorption and Variable Costing...Ch. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Deducing Changes ¡n Inventories LO7—3 Parker...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Prob. 10ECh. 7 - Segmented Income Statement L07—4 Wingate Company,...Ch. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Variable Costing Unit Product Cost and Income...Ch. 7 - Absorption Costing Unit Product Cost and Income...Ch. 7 - Working with a Segmented Income Statement;...Ch. 7 - Prob. 17ECh. 7 - Prob. 18PCh. 7 - Variable Costing Income Statement; Reconciliation...Ch. 7 - Variable and Absorption Costing Unit Product Costs...Ch. 7 - Segment Reporting and Decision-Making L07—4 Vulcan...Ch. 7 - Prob. 22PCh. 7 - Absorption and Variable Costing; Production...Ch. 7 - Companywide and Segment Break-Even Analysis;...Ch. 7 - Prepare and Interpret Income Statements; Changes...Ch. 7 - Prob. 26PCh. 7 - Variable and Absorption Costing Unit Product Costs...
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Operating segments; Author: The Finance Storyteller;https://www.youtube.com/watch?v=8IDQtBn902Q;License: Standard Youtube License