🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000US530,000

ACCT 23021 Lecture Notes - Lecture 10: Income Statement, Outsourcing, Offshoring

17 views3 pages
emmagennaro
2 Aug 2020
School
Kent State University
Department
Accounting
Course
ACCT 23021
Professor
John M Rose

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Product"s contribution margin and avoidable fixed costs (3 of 3) Do not base decision off of a product line income statement that includes the allocation of common fixed expenses. Shows the operating income of each product line, as well as for the company as a whole. Constraints: restrict the amount of product a company can manufacture/sell. Each pair of jeans increases operating income by . Machines have 2,000 hours of capacity time (constraint). Assume union bay"s jeans demand is limited to 30,000 pairs per period. Use the correct operational sign when computing contribution margin per hour. Units per hour: cm/unit x units/hour = cm/hour. Hours per unit: cm/unit hours/unit = cm/hour. Outsourcing: contracting an outside company to produce a product or perform a service. Contract manufacturers: only make products for other companies. Sony is deciding whether to make its own earbuds or outsource production to shenzhen electronics. Shenzhen is willing to provide earbuds for each.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACCT 23021 Lecture Notes - Lecture 3: Pension, Barcode, Finished Good
emmagennaro
ACCT 23021 Lecture Notes - Lecture 12: Cellophane, Income Statement, Earnings Before Interest And Taxes
emmagennaro
ACCT 23021 Lecture Notes - Lecture 8: Contribution Margin, Sensitivity Analysis, Earnings Before Interest And Taxes
emmagennaro

Related Questions

Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows:

Thalassines Kataskeves, S.A.
Income Statement—Bilge Pump
For the Quarter Ended March 31
Sales $ 410,000
Variable expenses:
Variable manufacturing expenses $ 130,000
Sales commissions 46,000
Shipping 14,000
Total variable expenses 190,000
Contribution margin 220,000
Fixed expenses:
Advertising (for the bilge pump product line) 27,000
Depreciation of equipment (no resale value) 106,000
General factory overhead 44,000 *
Salary of product-line manager 114,000
Insurance on inventories 8,000
Purchasing department 54,000 â€
Total fixed expenses 353,000
Net operating loss $ (133,000 )

*Common costs allocated on the basis of machine-hours.

†Common costs allocated on the basis of sales dollars.

Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company’s total general factory overhead or total Purchasing Department expenses.

Required:

What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?

Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows:

Thalassines Kataskeves, S.A.
Income Statement—Bilge Pump
For the Quarter Ended March 31
Sales $ 410,000
Variable expenses:
Variable manufacturing expenses $ 136,000
Sales commissions 46,000
Shipping 11,000
Total variable expenses 193,000
Contribution margin 217,000
Fixed expenses:
Advertising (for the bilge pump product line) 27,000
Depreciation of equipment (no resale value) 114,000
General factory overhead 45,000 *
Salary of product-line manager 110,000
Insurance on inventories 15,000
Purchasing department 53,000 â€
Total fixed expenses 364,000
Net operating loss $ (147,000 )

*Common costs allocated on the basis of machine-hours.

†Common costs allocated on the basis of sales dollars.

Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company’s total general factory overhead or total Purchasing Department expenses.

Required:

What is the financial advantage (disadvantage) of discontinuing the bilge pump product line?

EXERCISE 12-15 Dropping or Retaining a Segment [L012-2] Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experi- encing losses on its bilge pump product line for several years. The most recent quarterly contribu- tion format income statement for the bilge pump product line follows: Thalassines kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 $850,000 $330,000 42,000 18,000 390,000 460,000 Sales ........ Variable expenses: Variable manufacturing expenses ..... Sales commissions .. Shipping .......... Total variable expenses .... Contribution margin ..... Fixed expenses: Advertising ............... Depreciation of equipment (no resale value) ... General factory overhead .. Salary of product-line manager Insurance on inventories .... Purchasing department . Total fixed expenses Net operating loss ......... 270,000 80,000 105,000* 32,000 8,000 45,000 540,000 $ (80,000) *Common costs allocated on the basis of machine-hours. Common costs allocated on the basis of sales dollars. Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Depart- ment expenses. Required: Would you recommend that the bilge pump product line be discontinued? Support your answer with appropriate computations.