Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. What would have been the companys absorption costing net operating income (loss) if it had produced and sold 51,000 units? 2.If the company produces

1. What would have been the companys absorption costing net operating income (loss) if it had produced and sold 51,000 units?
2.If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?
3. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.
4. Diego is considering eliminating the West region because an internally generated report suggests the regions total gross margin in the first year of operations was $79,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? Assume the West region invests $46,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?
image text in transcribed
Diego Company manufactures one product that is sold for $73 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 56,000 units and sold 51,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense 24 16 2 3 $ 784,000 $ 672,000 The company sold 38,000 units in the East region and 13,000 units in the West region. It determined that $300,000 of its fixed selling and administrative expense is traceable to the West region, $250,000 is traceable to the East region, and the remaining $122,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer

12th Edition

978-0073526706, 9780073526706

More Books

Students also viewed these Accounting questions