Diego Company manufactures one product that is sold for $75 perunit in two geographic regionsâthe East and West regions. Thefollowing information pertains to the companyâs first year ofoperations in which it produced 46,000 units and sold 42,000units.
Variable costs per unit: Manufacturing: Directmaterials $ 25 Directlabor $ 20 Variablemanufacturing overhead $ 2 Variableselling and administrative $ 4 Fixedcosts per year: Fixedmanufacturing overhead $ 644,000 Fixedselling and administrative expense $ 388,000
The company sold 31,000 units in the East region and 11,000units in the West region. It determined that $200,000 of its fixedselling and administrative expense is traceable to the West region,$150,000 is traceable to the East region, and the remaining $38,000is a common fixed expense. The company will continue to incur thetotal amount of its fixed manufacturing overhead costs as long asit continues to produce any amount of its only product.
6a. What is the companyâs net operating income (loss) underabsorption costing?
6b.What is the amount of the difference between the variablecosting and absorption costing net operating incomes (losses)?
6c. What is the companyâs break-even point in unit sales?
6d. . If the sales volumes in the East and West regions had beenreversed, what would be the companyâs overall break-even point inunit sales?
6e. What would have been the companyâs variable costing netoperating income (loss) if it had produced and sold 42,000 units?You do not need to perform any calculations to answer thisquestion.
Diego Company manufactures one product that is sold for $75 perunit in two geographic regionsâthe East and West regions. Thefollowing information pertains to the companyâs first year ofoperations in which it produced 46,000 units and sold 42,000units.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Directmaterials | $ | 25 |
| Directlabor | $ | 20 |
| Variablemanufacturing overhead | $ | 2 |
| Variableselling and administrative | $ | 4 |
| Fixedcosts per year: | ||
| Fixedmanufacturing overhead | $ | 644,000 |
| Fixedselling and administrative expense | $ | 388,000 |
The company sold 31,000 units in the East region and 11,000units in the West region. It determined that $200,000 of its fixedselling and administrative expense is traceable to the West region,$150,000 is traceable to the East region, and the remaining $38,000is a common fixed expense. The company will continue to incur thetotal amount of its fixed manufacturing overhead costs as long asit continues to produce any amount of its only product.
6a. What is the companyâs net operating income (loss) underabsorption costing?
6b.What is the amount of the difference between the variablecosting and absorption costing net operating incomes (losses)?
6c. What is the companyâs break-even point in unit sales?
6d. . If the sales volumes in the East and West regions had beenreversed, what would be the companyâs overall break-even point inunit sales?
6e. What would have been the companyâs variable costing netoperating income (loss) if it had produced and sold 42,000 units?You do not need to perform any calculations to answer thisquestion.
Related questions
Diego Company manufactures one product that is sold for $75 perunit in two geographic regionsâthe East and West regions. Thefollowing information pertains to the companyâs first year ofoperations in which it produced 46,000 units and sold 42,000units.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Directmaterials | $ | 25 |
| Directlabor | $ | 20 |
| Variablemanufacturing overhead | $ | 2 |
| Variableselling and administrative | $ | 4 |
| Fixedcosts per year: | ||
| Fixedmanufacturing overhead | $ | 644,000 |
| Fixedselling and administrative expense | $ | 388,000 |
The company sold 31,000 units in the East region and 11,000units in the West region. It determined that $200,000 of its fixedselling and administrative expense is traceable to the West region,$150,000 is traceable to the East region, and the remaining $38,000is a common fixed expense. The company will continue to incur thetotal amount of its fixed manufacturing overhead costs as long asit continues to produce any amount of its only product.
3a. What is the companyâs total contribution margin undervariable costing?
3b. What is the companyâs total gross margin under absorptioncosting?
If the sales volumes in the East and West regions had beenreversed, what would be the companyâs overall break-even point inunit sales?
The following information applies to the questions displayedbelow.]
Diego Company manufactures one product that is sold for $70 perunit in two geographic regionsâthe East and West regions. Thefollowing information pertains to the companyâs first year ofoperations in which it produced 53,000 units and sold 48,000units. |
| Variable costs per unit: | ||
| Manufacturing: | ||
| Directmaterials | $ | 21 |
| Direct labor | $ | 10 |
| Variablemanufacturing overhead | $ | 2 |
| Variable sellingand administrative | $ | 4 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 1,060,000 |
| Fixed selling and administrativeexpenses | $ | 557,000 |
| The company sold 36,000 units in the East region and 12,000units in the West region. It determined that $270,000 of its fixedselling and administrative expenses is traceable to the Westregion, $220,000 is traceable to the East region, and the remaining$67,000 is a common fixed cost. The company will continue to incurthe total amount of its fixed manufacturing overhead costs as longas it continues to produce any amount of its only product. question related to this summary is above |
Diego Company manufactures one product that is sold for $77 perunit in two geographic regionsâthe East and West regions. Thefollowing information pertains to the companyâs first year ofoperations in which it produced 48,000 units and sold 43,000units.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Directmaterials | $ | 27 |
| Direct labor | $ | 12 |
| Variablemanufacturing overhead | $ | 3 |
| Variable sellingand administrative | $ | 5 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 864,000 |
| Fixed selling and administrativeexpenses | $ | 456,000 |
The company sold 33,000 units in the East region and 10,000units in the West region. It determined that $220,000 of its fixedselling and administrative expenses is traceable to the Westregion, $170,000 is traceable to the East region, and the remaining$66,000 is a common fixed cost. The company will continue to incurthe total amount of its fixed manufacturing overhead costs as longas it continues to produce any amount of its only product. |
| Required: |
Diego is considering eliminating the West region because aninternally generated report suggests the regionâs total grossmargin in the first year of operations was $50,000 less than itstraceable fixed selling and administrative expenses. Diego believesthat if it drops the West region, the East regionâs sales will growby 5% in Year 2. Using the contribution approach for analyzingsegment profitability and assuming all else remains constant inYear 2, what would be the profit impact of dropping the West regionin Year 2? |
| Profit impact ifthe western region is dropped. (Input the amount aspositive value.) |
| Profit will | (Click toselect)DecreaseIncrease | by | $ |
