PRESIDENT'S PROPOSAL. discontinue the s-pump line immediately. S pumps would not be returned to the product line unless the problems with the pump can be identified and resolved 2. increase quarterly sales promotion $300,000 on the R-pump product line in order to increase sales volume by 15%. 3. cut production on the F-Pump line by 50 percent, and cut the traceable advertising and promotion for this line to $60,000 each quarter.
"Using the operating data presented for ontario pump company and assume that the president's proposed course of action had been implemented at the beginning of the second quarter. Than evaluate the president's proposal by sepcifically responding...
Ontario Pump Company Shipping Expenses Income Statement Second Quarter
in thousands Analysis of unit sales prices for pumps Qtrly Advertising and Promotions R-Pump F-Pump S-Pump Total R-Pump $600 $630,000 $30 Sales $4,800 $2,700 $2,700 $10,200 F-Pump $270 $300,000 $12 Cost of goods sold $3,144 $2,310 $2,850 $8,304 S-Pump $540 $120,000 $30 Gross margin $1,656 $390 ($150) $1,896 Selling and Admin. Expenses $1,110 $555 $405 $2,070 Income before taxes $546 ($165) ($555) ($174) Unit manufacturing costs R-Pump F-Pump S-Pump Direct material $93 $51 $150 Direct labor 120 60 180 variable manufaturing overhead $135 $90 $180 fixed manufacturing overhead $45 $30 $60 total $393 $231 $570
The answer inc/decr fix cost & segment contribution is below. I am trying to figure out how to calculate the increased (decreased) for the fixed cost to get the answer noted below
R-Pump F-Pump S-Pump Unit Selling price $600 $270 $540 Direct material $93 $51 $150 Direct labor $120 $60 $180 variable manufaturing overhead $135 $90 $180 Shipping expenses $30 $12 $30 Total $378 $213 $540 Contribution Margin $222 $57 $0 x F-Pum: 10,000 X 50% x (5,000 R-Pump 8,000 X 15% x 1,200 S-Pump: 5,000 X 100% x (5,000 increase (decrease) in total contribution $(285,000 266,400 0 decrease (increase) fix cost 240,000 (300,000 120,000 increase (decrease in segment contribution $(45,000 $(33,600 $120,000
PRESIDENT'S PROPOSAL. discontinue the s-pump line immediately. S pumps would not be returned to the product line unless the problems with the pump can be identified and resolved 2. increase quarterly sales promotion $300,000 on the R-pump product line in order to increase sales volume by 15%. 3. cut production on the F-Pump line by 50 percent, and cut the traceable advertising and promotion for this line to $60,000 each quarter.
"Using the operating data presented for ontario pump company and assume that the president's proposed course of action had been implemented at the beginning of the second quarter. Than evaluate the president's proposal by sepcifically responding...
| Ontario Pump Company | Shipping Expenses | ||||||||
| Income Statement | |||||||||
| Second Quarter in thousands | |||||||||
| Analysis of unit sales prices for pumps | Qtrly Advertising and Promotions | ||||||||
| R-Pump | F-Pump | S-Pump | Total | R-Pump | $600 | $630,000 | $30 | ||
| Sales | $4,800 | $2,700 | $2,700 | $10,200 | F-Pump | $270 | $300,000 | $12 | |
| Cost of goods sold | $3,144 | $2,310 | $2,850 | $8,304 | S-Pump | $540 | $120,000 | $30 | |
| Gross margin | $1,656 | $390 | ($150) | $1,896 | |||||
| Selling and Admin. Expenses | $1,110 | $555 | $405 | $2,070 | |||||
| Income before taxes | $546 | ($165) | ($555) | ($174) | |||||
| Unit manufacturing costs | |||||||||
| R-Pump | F-Pump | S-Pump | |||||||
| Direct material | $93 | $51 | $150 | ||||||
| Direct labor | 120 | 60 | 180 | ||||||
| variable manufaturing overhead | $135 | $90 | $180 | ||||||
| fixed manufacturing overhead | $45 | $30 | $60 | ||||||
| total | $393 | $231 | $570 | ||||||
The answer inc/decr fix cost & segment contribution is below. I am trying to figure out how to calculate the increased (decreased) for the fixed cost to get the answer noted below
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Related questions
| Ontario Pump Company Income Statement Second Quarter In thousands | Analysis of unit sales prices for pumps | Qtrly Advertising and Promotions | Shipping Expenses | ||||||||
| R-Pump | F-Pump | S-Pump | Total | R-Pump | $600 | $630,000 | $30 | per unit | |||
| Sales | $4,800 | $2,700 | $2,700 | $10,200 | F-Pump | $270 | $300,000 | $12 | per unit | ||
| Cost of goods sold | $3,144 | $2,310 | $2,850 | $8,304 | S-Pump | $540 | $120,000 | $30 | per unit | ||
| Gross margin | $1,656 | $390 | -$150 | $1,896 | $1,050,000 | ||||||
| Selling and Admin. Expenses | $1,110 | $555 | $405 | $2,070 | |||||||
| Income before taxes | $546 | -$165 | -$555 | -$174 | |||||||
| Unit manufacturing costs | |||||||||||
| R-Pump | F-Pump | S-Pump | |||||||||
| Direct material | $93 | $51 | $150 | ||||||||
| Direct labor | 120 | 60 | 180 | ||||||||
| variable manufaturing overhead | $135 | $90 | $180 | ||||||||
| fixed manufacturing overhead | $45 | $30 | $60 | ||||||||
| total | $393 | $231 | $570 | ||||||||
PRESIDENT'S PROPOSAL. discontinue the s-pump line immediately. S pumps would not be returned to the product line unless the problems with the pump can be identified and resolved 2. increase quarterly sales promotion $300,000 on the R-pump product line in order to increase sales volume by 15%. 3. cut production on the F-Pump line by 50 percent, and cut the traceable advertising and promotion for this line to $60,000 each quarter.
"Using the operating data presented for ontario pump company and assume that the president's proposed course of action had been implemented at the beginning of the second quarter. Than evaluate the president's proposal by sepcifically responding...
I do not understand how the numbers were obtained for unit sales for the pumps i.e. F-pump is 10,000, R-pum is 8,00, S-pump i s 5,000. I see the hint of Unit sales = sales dollars/unit sales price but I am still not able to calculate how to get the 10,000, 8,000, 5,000. it is question 14-62 of the Managerial Accounting 10the ediction....This is the answer (below) the above is all the information given ? are you able to look at the text answer? I am trying to figure out how they got to 10,000, 8,000; and 5,000
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A small manufacturing company in Toronto, Ontario, manufacturesthree types of pumps used in a variety of applications. For manyyears the company has been profitable and has operated at capacity.However, in the last two years prices on all pumps were reduced andselling expenses increased to meet competition and keep the plantoperating at capacity. Second-quarter results for the current year,which follow, typify recent experience. |
| ONTARIO PUMP COMPANY | ||||||||||||
| Income Statement | ||||||||||||
| Second Quarter | ||||||||||||
| (in thousands) | ||||||||||||
| R-Pump | F-Pump | S-Pump | Total | |||||||||
| Sales | $ | 6,956 | $ | 4,674 | $ | 4,352 | $ | 15,982 | ||||
| Cost of goodssold | 4,556 | 4,000 | 4,593 | 13,149 | ||||||||
| Gross margin | $ | 2,400 | $ | 674 | $ | (241 | ) | $ | 2,833 | |||
| Selling andadministrative expenses | 1,609 | 961 | 653 | 3,223 | ||||||||
| Income beforetaxes | $ | 791 | $ | (287 | ) | $ | (894 | ) | $ | (390 | ) | |
Maria Carlo, the company'spresident, is concerned about the results of the pricing, selling,and production prices. After reviewing the second-quarter resultsshe asked her management staff to consider the following threesuggestions: |
| ⢠| Discontinue the S-Pump line immediately. S-Pumps would not bereturned to the product line unless the problems with the pump canbe identified and resolved. |
| ⢠| Increase quarterly sales promotion by $440,000 on the R-Pumpproduct line in order to increase sales volume by 15 percent. |
| ⢠| Cut production on the F-Pump line by 50 percent, and cut thetraceable advertising and promotion for this line to $130,000 eachquarter. |
Justin Sperry, the controller,suggested a more careful study of the financial relationships todetermine the possible effects on the companyâs operating resultsof the presidentâs proposed course of action. The president agreedand assigned JoAnn Brower, the assistant controller, to prepare ananalysis. Brower has gathered the following information. |
| ⢠| The unit sales prices for thethree pumps are as follows: |
| R-Pump | $ | 740 | |
| F-Pump | 410 | ||
| S-Pump | 680 | ||
| ⢠| The company is manufacturing atcapacity and is selling all the pumps it produces. |
| ⢠| All three pumps are manufacturedwith common equipment and facilities. |
| ⢠| The selling and administrative expense is allocated to the threepump lines based on average sales volume over the past threeyears. |
| ⢠| Special selling expenses (primarily advertising, promotion, andshipping) are incurred for each pump as follows: |
| Quarterly Advertising and Promotion | Shipping Expenses | |||||
| R-Pump | $ | 770,000 | $ | 44 | per unit | |
| F-Pump | 440,000 | 26 | per unit | |||
| S-Pump | 260,000 | 100 | per unit | |||
| ⢠| The unit manufacturing costs forthe three pumps are as follows: |
| R-Pump | F-Pump | S-Pump | |||||||
| Direct material | $ | 107.00 | $ | 65.00 | $ | 164.00 | |||
| Direct labor | 148.00 | 88.00 | 208.00 | ||||||
| Variablemanufacturing overhead | 163.00 | 118.00 | 208.00 | ||||||
| Fixed manufacturingoverhead | 66.68 | 79.88 | 137.66 | ||||||
| Total | $ | 484.68 | $ | 350.88 | $ | 717.66 | |||
| 1. Use the operatingdata presented for Ontario Pump Company and assume that thepresident's proposed course of action had been implemented at thebeginning of the second quarter. SHOW ALL WORK. |
| a. Calculate the net impact on income before taxes foreach of the three suggestions. Fill in the chartbelow.
b. calculate the contribution margin for S pump. c. calculate the contribution per direct-labor dollar for r pumpand f pump. |
