Hi, please help!!!
Pacific Rim Industries is a diversified company whose productsare marketed both domestically and internationally. The companyâsmajor product lines are furniture, sports equipment, and householdappliances. At a recent meeting of Pacific Rimâs board ofdirectors, there was a lengthy discussion on ways to improveoverall corporate profitability. The members of the board decidedthat they required additional financial information aboutindividual corporate operations in order to target areas forimprovement.
Danielle Murphy, the controller,has been asked to provide additional data that would assist theboard in its investigation. Murphy believes that income statements,prepared along both product lines and geographic areas, wouldprovide the directors with the required insight into corporateoperations. Murphy had several discussions with the divisionmanagers for each product line and compiled the followinginformation from these meetings.
Product Lines Furniture Sports Appliances Total Production and sales in units 160,000 180,000 160,000 500,000 Average selling price per unit $ 9.00 $ 21.00 $ 14.00 Average variable manufacturing cost per unit 5.00 9.60 8.26 Average variable selling expense per unit 2.00 2.20 2.25 Fixed manufacturing overhead,
excluding depreciation $ 512,000 Depreciation of plant and equipment 412,000 Administrative and selling expense 1,190,000
1. The division managers concluded that Murphy should allocatefixed manufacturing overhead to both product lines and geographicareas on the basis of the ratio of the variable costs expended tototal variable costs.
2. Each of the division managers agreed that a reasonable basis forthe allocation of depreciation on plant and equipment would be theratio of units produced per product line (or per geographical area)to the total number of units produced.
3. There was little agreement on the allocation of administrativeand selling expenses, so Murphy decided to allocate only thoseexpenses that were traceable directly to a segment. For example,manufacturing staff salaries would be allocated to product lines,and sales staff salaries would be allocated to geographic areas.Murphy used the following data for this allocation.
Manufacturing Staff Sales Staff Furniture $ 121,000 United States $ 61,000 Sports 141,000 Canada 101,000 Appliances 81,000 Asia 251,000
4. The division managers were able to provide reliable salespercentages for their product lines by geographical area.
Percentage of Unit Sales United States Canada Asia Furniture 30 % 20 % 50 % Sports 30 % 30 % 40 % Appliances 20 % 20 % 60 %
Murphy preparedthe following product-line income statement based on the datapresented above.
PACIFIC RIM INDUSTRIES Segmented Income Statement by Product Lines For the Fiscal Year Ended April 30, 20x0 Product Lines Furniture Sports Appliances Unallocated Total Sales in units 160,000 180,000 160,000 Sales $ 1,440,000 $ 3,780,000 $ 2,240,000 â $ 7,460,000 Variable manufacturing
and selling costs 1,120,000 2,124,000 1,681,600 â $ 4,925,600 Contribution margin $ 320,000 $ 1,656,000 $ 558,400 â $ 2,534,400 Fixed costs: Fixed manufacturing overhead $ 100,000 $ 225,000 $ 187,000 $ â $ 512,000 Depreciation 131,000 147,000 134,000 â 412,000 Administrative and selling
expenses 121,000 143,000 82,000 844,000 1,190,000 Total fixedcosts $ 352,000 $ 515,000 $ 403,000 $ 844,000 $ 2,114,000 Operating income (loss) $ (32,000 ) $ 1,141,000 $ 155,400 $ (844,000 ) $ 420,400
Required: 1. Prepare a segmented income statement for Pacific Rim Industriesbased on the company's geographical areas. (Input allamounts as positive values except losses which should be indicatedby minus sign. Do not round intermediate calculations and roundfinal answers to the nearest dollar amount. Omit the "$" sign inyour response.)
PACIFIC RIM INDUSTRIES SEGMENTED INCOME STATEMENT BY GEOGRAPHIC AREAS FOR THE FISCAL YEAR ENDED APRIL 30, 20x0 Geographic Areas UnitedStates Canada Asia Unallocated Total Sales in units Furniture Sports Appliances Total unitsales Revenue Furniture $ $ $ $ Sports Appliances Totalrevenue $ $ $ $ Variable costs Furniture $ $ $ $ Sports Appliances Totalvariable costs $ $ $ $ Contribution margin $ $ $ $ Fixed costs Manufacturing overhead $ $ $ $ Depreciation Administrative and
sellingexpenses $ Total fixedcosts $ $ $ $ $ Operating income (loss) $ $ $ $ $
Hi, please help!!!
Pacific Rim Industries is a diversified company whose productsare marketed both domestically and internationally. The companyâsmajor product lines are furniture, sports equipment, and householdappliances. At a recent meeting of Pacific Rimâs board ofdirectors, there was a lengthy discussion on ways to improveoverall corporate profitability. The members of the board decidedthat they required additional financial information aboutindividual corporate operations in order to target areas forimprovement. |
Danielle Murphy, the controller,has been asked to provide additional data that would assist theboard in its investigation. Murphy believes that income statements,prepared along both product lines and geographic areas, wouldprovide the directors with the required insight into corporateoperations. Murphy had several discussions with the divisionmanagers for each product line and compiled the followinginformation from these meetings. |
| Product Lines | ||||||||||||
| Furniture | Sports | Appliances | Total | |||||||||
| Production and sales in units | 160,000 | 180,000 | 160,000 | 500,000 | ||||||||
| Average selling price per unit | $ | 9.00 | $ | 21.00 | $ | 14.00 | ||||||
| Average variable manufacturing cost per unit | 5.00 | 9.60 | 8.26 | |||||||||
| Average variable selling expense per unit | 2.00 | 2.20 | 2.25 | |||||||||
| Fixed manufacturing overhead, excluding depreciation | $ | 512,000 | ||||||||||
| Depreciation of plant and equipment | 412,000 | |||||||||||
| Administrative and selling expense | 1,190,000 | |||||||||||
| 1. | The division managers concluded that Murphy should allocatefixed manufacturing overhead to both product lines and geographicareas on the basis of the ratio of the variable costs expended tototal variable costs. |
| 2. | Each of the division managers agreed that a reasonable basis forthe allocation of depreciation on plant and equipment would be theratio of units produced per product line (or per geographical area)to the total number of units produced. |
| 3. | There was little agreement on the allocation of administrativeand selling expenses, so Murphy decided to allocate only thoseexpenses that were traceable directly to a segment. For example,manufacturing staff salaries would be allocated to product lines,and sales staff salaries would be allocated to geographic areas.Murphy used the following data for this allocation. |
| Manufacturing Staff | Sales Staff | ||||||
| Furniture | $ | 121,000 | United States | $ | 61,000 | ||
| Sports | 141,000 | Canada | 101,000 | ||||
| Appliances | 81,000 | Asia | 251,000 | ||||
| 4. | The division managers were able to provide reliable salespercentages for their product lines by geographical area. |
| Percentage of Unit Sales | ||||||
| United States | Canada | Asia | ||||
| Furniture | 30 | % | 20 | % | 50 | % |
| Sports | 30 | % | 30 | % | 40 | % |
| Appliances | 20 | % | 20 | % | 60 | % |
| Murphy preparedthe following product-line income statement based on the datapresented above. |
| PACIFIC RIM INDUSTRIES | |||||||||||||||
| Segmented Income Statement by Product Lines | |||||||||||||||
| For the Fiscal Year Ended April 30, 20x0 | |||||||||||||||
| Product Lines | |||||||||||||||
| Furniture | Sports | Appliances | Unallocated | Total | |||||||||||
| Sales in units | 160,000 | 180,000 | 160,000 | ||||||||||||
| Sales | $ | 1,440,000 | $ | 3,780,000 | $ | 2,240,000 | â | $ | 7,460,000 | ||||||
| Variable manufacturing and selling costs | 1,120,000 | 2,124,000 | 1,681,600 | â | $ | 4,925,600 | |||||||||
| Contribution margin | $ | 320,000 | $ | 1,656,000 | $ | 558,400 | â | $ | 2,534,400 | ||||||
| Fixed costs: | |||||||||||||||
| Fixed manufacturing overhead | $ | 100,000 | $ | 225,000 | $ | 187,000 | $ | â | $ | 512,000 | |||||
| Depreciation | 131,000 | 147,000 | 134,000 | â | 412,000 | ||||||||||
| Administrative and selling expenses | 121,000 | 143,000 | 82,000 | 844,000 | 1,190,000 | ||||||||||
| Total fixedcosts | $ | 352,000 | $ | 515,000 | $ | 403,000 | $ | 844,000 | $ | 2,114,000 | |||||
| Operating income (loss) | $ | (32,000 | ) | $ | 1,141,000 | $ | 155,400 | $ | (844,000 | ) | $ | 420,400 | |||
| Required: | |
| 1. | Prepare a segmented income statement for Pacific Rim Industriesbased on the company's geographical areas. (Input allamounts as positive values except losses which should be indicatedby minus sign. Do not round intermediate calculations and roundfinal answers to the nearest dollar amount. Omit the "$" sign inyour response.) |
| PACIFIC RIM INDUSTRIES | |||||
| SEGMENTED INCOME STATEMENT BY GEOGRAPHIC AREAS | |||||
| FOR THE FISCAL YEAR ENDED APRIL 30, 20x0 | |||||
| Geographic Areas | |||||
| UnitedStates | Canada | Asia | Unallocated | Total | |
| Sales in units | |||||
| Furniture | |||||
| Sports | |||||
| Appliances | |||||
| Total unitsales | |||||
| Revenue | |||||
| Furniture | $ | $ | $ | $ | |
| Sports | |||||
| Appliances | |||||
| Totalrevenue | $ | $ | $ | $ | |
| Variable costs | |||||
| Furniture | $ | $ | $ | $ | |
| Sports | |||||
| Appliances | |||||
| Totalvariable costs | $ | $ | $ | $ | |
| Contribution margin | $ | $ | $ | $ | |
| Fixed costs | |||||
| Manufacturing | |||||
| overhead | $ | $ | $ | $ | |
| Depreciation | |||||
| Administrative and sellingexpenses | $ | ||||
| Total fixedcosts | $ | $ | $ | $ | $ |
| Operating income (loss) | $ | $ | $ | $ | $ |
