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Accounting MRK108 Lecture : lamb_mktg_2ce_maps_ch09.pdf

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School
Seneca College
Department
Accounting
Course
Accounting MRK108
Professor
Rohan Singh

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Document Summary

Product: everything, both favourable and unfavourable, received by a person in an exchange. It could be a tangible good, a service, an idea, or any combination. Shopping products: relatively inexpensive items that merit little shopping effort, consumers buy these products regularly, usually without much planning, normally require wide distribution in order to sell sufficient quantities to make a profit. Specialty products: consumers search extensively for these items. Unsought products: products unknown to the potential buyer or known products that the buyer does not actively seek, they require aggressive personal selling and highly persuasive advertising. Product mix (all the products a company sells) Changes to one or more of a product"s characteristics: quality modifications, functional modifications, style modifications. The practice of modifying products so those that have already been sold become obsolete before they actually need replacement. Adding additional products to an existing product line to compete more broadly in the industry. Removing a product line from the current product mix.

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Related Questions

Chocolatiers Company produces two products: Solid chocolate andpowdered chocolate. Cost and revenue data for each product line forthe current month are as follows:

Product Lines

Solid Powdered

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . $850,000 $870,000

Contribution margin as a percentage of sales . . . . . . . . . .. . . . . . . . 45% 55%

Fixed costs traceable to product lines . . . . . . . . . . . . .. . . . . . . . . . . $175,000 $250,000

In addition, fixed costs that are common to both product linesamount to $125,000.

Instructions

a. Prepare Chocolatiers’s responsibility incomestatement for the current month. Report the responsibility marginfor each product line and income from operations for the company asa whole. Also include columns showing all dollar amounts aspercentages of sales.

b. According to the analysis performed in parta, which product line is more profitable? Shouldthe common fixed costs be considered when determining theprofitability of individual product lines? Why or why not?

c. Chocolatiers has $15,000 to be used inadvertising for one of the two product lines and expects that thisexpenditure will result in additional sales of $50,000. How shouldthe company decide which product line to advertise?

In each of the following circumstances, determine whether the disposal would qualify as a discontinued operation. All companies are calendar year companies and the transactions are occurring in 2017. Give citations from the ASC to justify your answer.

1. An entity manufactures and sells consumer products that are grouped into five major product lines. Each product line includes several brands that comprise the lowest where operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. Product line 1 is made up of almost 100 different individual products. Due to declining sales 3 products in Product line 1 were discontinued during the year.

2. An entity manufactures and sells consumer products that are grouped into five major product lines. Each product line includes several brands that comprise the lowest where operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. Product line 3 which makes up between 20 & 25% of the entity’s total revenues has experienced significant market declines while the other product lines have been growing. As a result, the entity has decided to sale its operations associated with Product line 3.

3. An entity operates restaurants in several states. For that entity, each restaurant comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. As a result of an above market offer for two of its restaurants in the state of Alabama, the entity sold these restaurants. These two restaurants produced between 1 & 3% of the entity’s total revenues and comprised about 1.5% of the entity’s total assets.

Exercise 16-18 The product mix decision LO 2, 3

ABC Company produces Product X, Product Y, and Product Z. Allthree products require processing on specialized finishingmachines. The capacity of these machines is 2,190 hours per month.ABC Company wants to determine the product mix that should beachieved to meet the high demand for each product and provide themaximum profit. Following is information about each product:

Product X Product Y Product Z
Selling price $ 151 $ 119 $ 37
Variable costs 103 58 31
Machine time per unit 3 hours 3 hours 1 hour
Monthly demand (units) 430 300 745

Required:

Determine how the 2,190 hours of machine time should beallocated to the three products to provide the most profitableproduct mix. (Do not round intermediatecalculations.)