Exercise 4-44 (Algo) Dropping Product Lines (LO 4-4) Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 389,300 240,600 156,230 $(7,530) 44 Inch $ 593,300 294,680 234,464 $ 64,156 54 Inch $ 371,100 172,500 147,806 $ 50,794 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line?

Exercise 4-44 (Algo) Dropping Product Lines (LO 4-4) Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 389,300 240,600 156,230 $(7,530) 44 Inch $ 593,300 294,680 234,464 $ 64,156 54 Inch $ 371,100 172,500 147,806 $ 50,794 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter14: The Balanced Scorecard And Corporate Social Responsibility

Section: Chapter Questions

Problem 2PB: Strategic initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new...

See similar textbooks

Similar questions

Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. Revenues Variable costs Fixed costs allocated to products Operating profit (loss) 36 Inch $ 376,000 233,600 149, 230 $ (6,830) 44 Inch $ 578,600 287,680 227,464 $ 63,456 54 Inch $ 356,400 165,500 140, 806 $ 50,094 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your…
Please answer questions 1 through 3. Please make the answers very clear and refer to the images attached.Notice that the first three questions require answers for Debbie, Trish, Sarah, Mike and Sewing Kit. Problem 11-25 (Algo) Volume Trade-Off Decisions [LO11-5, LO11-6] The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 61,000 $ 20.00 $ 5.40 $ 3.60 Trish 53,000 $ 6.50 $ 2.20 $ 1.44 Sarah 46,000 $ 33.50 $ 8.09 $ 6.30 Mike 44,400 $ 14.00 $ 3.10 $ 4.50 Sewing kit 336,000 $ 9.10 $ 4.30 $ 0.99 The following additional information is available: The company’s plant has a capacity of 113,140 direct labor-hours per year on a single-shift basis.…
Question: 4. Vanguard Office Supplies Is A Nationwide Retail Chain That Offers Office Supplies And Office Furniture. Company Management Has Decided That, From Both A Competitive And A Cost-cutting Standpoint, Vanguard Should Offer Its Own Private-label Brands For Products Like Student Notebooks, Fillers, Ledgers And Journals, Bond And Linen Paper, And Other Products. ... This problem has been solved! See the answer 4. Vanguard Office Supplies is a nationwide retail chain that offers office supplies and office furniture. Company management has decided that, from both a competitive and a cost-cutting standpoint, Vanguard should offer its own private-label brands for products like student notebooks, fillers, ledgers and journals, bond and linen paper, and other products. To accomplish this objective, Vanguard is considering the purchase of Omega Paper, a manufacturer of paper products and notebooks. A five-year income forecast for Omega is given, along with other pertinent information.…
Part A KM Sdn. Bhd. (KM) produces two different types of high quality handbags, Luxury and Superior. Each design is made in small batches. The bags are all made on the same special equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each batches of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. KM uses activity-based costing and provides the following budgeted information for the year ended 31 December 2017: Luxury (RM) Total (RM) Superior (RM) 412,920 120,000 Direct material Direct labour Manufacturing overhead: Set up Shipping Design Plant utilities and administration Total 379,290 98,000 792,210 218,000 65,930 73,910 166,000 243,000 1,559,050 Other information follows: Luxury 6,050 1,450 130 Superior 3,350 2,600 60 Total Number of bags Hours of production Number of batches Number of designs 9,400…
Buck Products, located in Charleston, South Carolina,produces two lines of electric toothbrushes: Deluxe and Standard. Because Buck can sell all the toothbrushes it produces, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data: Per Unit Deluxe Toothbrush Standard Toothbrush Sales price. . . . . . . . . . . . . . . . . . Deluxe $92 Standard $44 Variable expenses. . . . . . . . . . . . Deluxe 22 Standard 15 Contribution margin. . . . . . . . . . Deluxe $70 Standard $29 Contribution margin ratio. . . . . . Deluxe 76.1% Standard 65.9% After expansion, the factory will have a production capacity of 4,800 machine hours per month. The plant can manufacture either 56 Standard electric toothbrushes or 27 Deluxe electric toothbrushes per machine hour. Requirements 1. Identify the constraining factor for Buck Products. 2. Prepare an analysis to show which product line to emphasize.…
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Total Sales $250,000 $590,000 $619,500 $1,459,500 Less variable costs of goods sold (86,000) (160,560) (332,800) (579,360) Less commissions (5,200) (34,500) (23,750) (63,450) Contribution margin $158,800 $394,940 $262,950 $816,690 Less common fixed expenses: Fixed factory overhead (375,000) Fixed selling and administrative (283,000) Operating income $158,690 While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10…
Muffin Factory (MF) bakes and sells muffins. MF buys materials from suppliers and bakes, frosts, and packages them for resale. Currently the firm offers 2 different types of muffins to gourmet bake shops in boxes, each containing a dozen muffins. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in the baking, frosting, and packing process. MF prices its muffins at full product cost, including allocated overhead, plus a markup of 40%. Data for the current budget include factory overhead of $919,400, which has been allocated by its current costing system on the basis of each product’s direct labor cost. The budgeted direct labor cost for the current year totals $300,000. The budgeted direct costs for a one-dozen box of two of the company’s most popular muffins are as follows: Costs per one dozen Blueberry Cinnamon Activity Cost Driver Budgeted Activity Budgeted Cost Direct materials $…
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Total Sales $250,000 $586,000 $607,000 $1,443,000 Less variable costs of goods sold (90,000) (173,760) (334,400) (598,160) Less commissions (5,200) (36,000) (19,250) (60,450) Contribution margin $154,800 $376,240 $253,350 $784,390 Less common fixed expenses: Fixed factory overhead (405,000) Fixed selling and administrative (291,000) Operating income $88,390 While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10…
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Total Sales $245,000 $550,000 $619,500 $1,414,500 Less variable costs of goods sold (95,500) (172,440) (357,600) (625,540) Less commissions (4,000) (26,500) (21,250) (51,750) Contribution margin $145,500 $351,060 $240,650 $737,210 Less common fixed expenses: Fixed factory overhead (380,000) Fixed selling and administrative (299,000) Operating income $58,210 While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10…
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below. Model 1 Model 2 Model 3 Total Sales $225,000 $590,000 $648,500 $1,463,500 Less variable costs of goods sold (93,500) (168,040) (354,000) (615,540) Less commissions (4,000) (33,500) (23,000) (60,500) Contribution margin $127,500 $388,460 $271,500 $787,460 Less common fixed expenses: Fixed factory overhead (390,000) Fixed selling and administrative (283,000) Operating income $114,460 While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10…
Annie B's Homemade Ice Cream is an ice cream shop in Asheville, NC. Its owners would like your assistance in classifying some of its costs as direct or indirect depending on the specified cost object. Required: 1. Which of the following costs could be directly traced to specific flavors of ice cream? 2. Which of the following costs could be directly traced to specific mobile sales events, such as selling pre-packaged servings of ice cream at the Cold Mountain Music Festival? 3. Which of the following costs could be directly traced to "mobile sales" as opposed to "in-store sales? Complete this question by entering your answers in the tabs below. Requirement 1 Requirement 2 Requirement 3 Which of the following costs could be directly traced to specific flavors of ice cream? 1. Walk-in freezer depreciation 2 Wages paid to employees scooping ice cream in the store 3. Cost of ingredients used to make ice cream 4. Cost of electricity used to run the batch freezer that makes ice cream 5.…
Portsmouth Company makes fine colonial reproduction furniture. Upholstered furniture is one of its major product lines and the bottleneck on this production line is time in the upholstery shop. Upholstering is a craft that takes years of experience to master and the demand for upholstered furniture far exceeds the company’s capacity in the upholstering shop. Information concerning three of the company’s upholstered chairs appears below: Recliner Sofa Love Seat Selling price per unit $1,292 $1,690 $1,225 Variable cost per unit $900 $1,150 $850 Upholstery shop time required to produce one unit 7 hours 12 hours 5 hours Required: 1. More time could be made available in the upholstery shop by asking the employees who work in this shop to work overtime. Assuming that this extra time would be used to produce sofas, up to how much should the company be willing to pay per hour to keep the upholstery shop open after normal working hours? 2. A small nearby…