In: Finance
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 | $ | $ | $ | |
$ |
Expert Answer
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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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Answers from our experts for your tough homework questions
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 | ||||||