Katrina Flatt Managerial Accounting: Acct 325 Face to Face Spring 2018 Prof Jeff
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Katrina Flatt
Managerial Accounting: Acct 325 Face to Face Spring 2018 Prof Jefferies - Web BB & Connect
Ch 12 Exercises
6.
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Exercise 12-15 Dropping or Retaining a Segment [LO12-2]
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:
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.
Compute the increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.)
Garrison 15e Recheck 2014-12-31
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WorksheetDifficulty: 1 Easy
Exercise 12-15 Dropping or Retaining a Segment [LO12-2]Learning Objective: 12-02 Prepare an analysis showing whether a product line or other business segment should be added or dropped.
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Ch 12 Exercises
instructions | helpExplanation / Answer
Keep ProductLine Drop Product Line Difference Sales 450000 0 -450000 Variable expenses: Variable manufacturing expenses 124000 0 124000 Sales commissions 54000 0 54000 Shipping 13000 0 13000 Total variable expenses 191000 0 191000 Contribution margin 259000 0 -259000 Fixed expenses: Advertising 25000 0 25000 Depreciation of equipment 119000 119000 0 General factory overhead 31000 31000 0 Salary of product line manager 115000 0 115000 Insurance on inventories 14000 0 14000 Purchasing department 42000 42000 0 Total fixed expenses 346000 192000 154000 Net operating Income (loss) -87000 -192000 -105000 Decrease of net operating income $105000 b NO
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