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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.
View comments (1)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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