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Segmented Income Statements, Product-Line Analysis Alard Company produces blenders and coffee makers. During the past year,...

Segmented Income Statements, Product-Line Analysis

Alard Company produces blenders and coffee makers. During the past year, the company produced and sold 65,000 blenders and 75,000 coffee makers. Fixed costs for Alard totaled $340,000, of which $184,000 can be avoided if the blenders are not produced and $142,500 can be avoided if the coffee makers are not produced. Revenue and variable cost information follows:

Blenders Coffee Makers
Selling price per appliance $24 $29
Variable expenses per appliance 18 27

Required:

1. Prepare segmented income statements. Separate direct and common fixed costs. Enter all amounts as positive numbers.

Alard Company
Segmented Income Statement
Blenders Coffee Makers Total
$ $ $
$ $ $
$ $ $
$

2. What would the effect be on Alard’s profit if the coffee maker line is dropped? The blender line?

If the coffee maker line is dropped, profits will   by $, the segment margin. If the blender line is dropped, profits will   by $.

3. What would the effect be on firm profits if an additional 10,000 blenders could be produced (using existing capacity) and sold for $21.50 on a special-order basis? Existing sales would be unaffected by the special order. Enter all amounts as positive numbers.

Alard Company
Segmented Income Statement
Blenders Coffee Makers Total
$ $ $
Contribution margin $ $ $
Segment margin $ $ $
$

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    1-Segment income Statement

    65000 untis 75000 untis TOTAL
    Details Blenders Coffe Makers
    Sales                          1,560,000.00    2,175,000.00    3,735,000.00
    Costs
    Fixed        340,000.00
    Variable                          1,170,000.00    2,025,000.00    3,195,000.00
    Profit                              390,000.00        150,000.00        200,000.00

    2.

    Only blenders,Coffee maker dropped
    65000 untis
    Details Blenders
    Sales                          1,560,000.00
    Costs
    Fixed                              197,500.00
    Variable                          1,170,000.00
    Profit                              192,500.00

    3.

    Only Coffee,blenders dropped
    75000 untis
    Details Coffe Makers
    Sales                          2,175,000.00
    Costs
    Fixed                              156,000.00
    Variable                          2,025,000.00
    Profit                                (6,000.00)

    4.Special order case with existng Capacity.

    65000 untis+10,000 Unts 75000 untis TOTAL
    Details Blenders Coffe Makers
    Sales-Regular                          1,560,000.00    2,175,000.00    3,735,000.00
    Sales-Special order                              215,000.00                         -          215,000.00
    Total Sales                          1,775,000.00    2,175,000.00    3,950,000.00
    Costs
    Fixed        340,000.00
    Variable                          1,350,000.00    2,025,000.00    3,375,000.00
    Profit                              425,000.00        150,000.00        235,000.00
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Expert Solution

1 Segmented Income Statement
Blenders Coffee Makers Total
a Units sold 65000 75000
b Unit Selling Price $24 $29
c Unit Variable cost $18 $27
d=a*b Sales Revenue $1,560,000 $2,175,000 $3,735,000
e=a*c Variable Cost $1,170,000 $2,025,000 $3,195,000
f=d-e Contribution margin $390,000 $150,000 $540,000
g Fixed Cost $184,000 $142,500 $326,500
h Un allocated common Fixed cost $13,500 (340000-184000-142500)
Income $206,000 $7,500 $200,000
Profit
2 If the Coffee maker Line is dropped: $192,500 (200000-7500)
If the Blender Line is dropped: ($6,000) (200000-206000)
3 If additional 10,000 blenders are produced
Additional Sales Revenue= $215,000 (10000*21.50
Total Sales Revenue=215000+1560000 $1,775,000
Additional Variable cost= $180,000 (10000*18)
Total Variable Cost=1170000+180000 $1,350,000
Blenders Coffee Makers Total
Sales Revenue $1,775,000 $2,175,000 $3,950,000
Variable Cost $1,350,000 $2,025,000 $3,375,000
Contribution margin $425,000 $150,000 $575,000
Fixed Cost $184,000 $142,500 $326,500
Un allocated common Fixed cost $13,500
Income $241,000 $7,500 $235,000

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