4.5 is 1 photo. 4.6 is 2.

40. Product Line Decision. The following monthly segmented income statement is for Hal's Hardware. Product Lines Tools Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Garden Supplies $20,000 11,000 $ 9,000 3,000 2,000 $ 4,000 $15,000 8,000 $ 7,000 1,500 5,000 $ 500 Paint $23,000 9,000 $14,000 8,500 3,000 $ 2,500 $58,000 28,000 $30,000 13,000 10,000 $ 7,000 Management is concerned about the low profit associated with the tools uct line and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on floor space used by each product line (measured in square feet), resulting in the following percentages for garden supplies, tools, and paint, respectively: 20 percent, 50 percent, and 30 percent. If the tools product line is eliminated, total allocated fixed costs will be assigned as follows: 62.5 percent to garden supplies, and 37.5 percent to paint. All variable and direct fixed costs for the tools product line will be eliminated. Required: Focus Required: 1. Perform differential analysis using the format presented in Figure 4.5 "Product Line Differential Analysis for Barbeque Company". Assume keeping all product lines is Alternative 1. and dropping the tools product line is Alternative 2. 2. Which alternative is best? Explain. 3. Summarize the result of dropping the tools product line using the format presented in Figure 4.6 "Summary of Differential Analysis for Barbeque Company". 4. Assume the space available from dropping the tools product line can be used by the paint product line, resulting in increased revenues for paint of $12,000 and increased variable costs for paint of $4,000. No additional direct fixed costs would be incurred, and 80 percent of allocated fixed costs would be assigned to paint and 20 percent assigned to garden supplies. Should Hal's Hardware drop the tools product line and use the freed-up space to expand the paint product line? (Hint: Prepare a differential analysis using the format presented in Figure 4.5 "Product Line Differential Analysis for Barbeque Company" to find the answer. Alternative 1 assumes all product lines are kept, and Alternative 2 assumes the tools product line is dropped with a corresponding expansion of the paint product line.) Figure 4.5 Income Statement for Barbeque Company Product Lines Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Gas Barbecues $450,000 110,000 $340,000 60,000 90,000 $190,000 Charcoal Barbecues $ 90,000 40,000 $ 50,000 40,000 18,000 $ (8,000) Barbecue Accessories $60,000 15,000 $45,000 16,000 12,000 $17,000 Total $600,000 165,000 $435,000 116,000 120,000 $199,000 *Includes cost of goods sold and other variable costs. Panel A: Alternative 1 (keep all product lines) Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Gas Barbecues $450,000 110,000 $340,000 60,000 90,000 $190,000 Charcoal Barbecues $90,000 40,000 $50,000 40,000 18,000 $( 8,000) Barbecue Accessories $60,000 15,000 $45,000 16,000 12,000 $17,000 Total $600,000 165,000 $435,000 116,000 120,000 $199,000 Panel B: Alternative 2 (drop the charcoal barbecues line) Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Gas Barbecues $450,000 110,000 $340,000 60,000 105,882 $174,118 Barbecue Accessories $60,000 15,000 $45,000 16,000 14,1186 $14,882 Total $510,000 125,000 $385,000 76,000 120,000 $189,000 Panel C: Dif jal Analysis Panel C: Differential Analysis Alternative 1 Total (keep all product lines; panel A) $600,000 165,000 $435,000 116,000 120,000 $199,000 Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Alternative 2 Total (drop charcoal barbecues; panel B) $510,000 125,000 $385,000 76,000 120,000 $189,000 Differential Amount $90,000 40,000 $50,000 Alternative 1 Is Higher Higher Higher Higher 40,000 0 $10,000 Higher a $105,882 = ($450,000 - $510,000) $120,000. b$14,118 = ($60,000 = $510,000) $120,000. The Differential Amount column in panel C of Figure 4.6 "Product Line Differential 40. Product Line Decision. The following monthly segmented income statement is for Hal's Hardware. Product Lines Tools Total Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Garden Supplies $20,000 11,000 $ 9,000 3,000 2,000 $ 4,000 $15,000 8,000 $ 7,000 1,500 5,000 $ 500 Paint $23,000 9,000 $14,000 8,500 3,000 $ 2,500 $58,000 28,000 $30,000 13,000 10,000 $ 7,000 Management is concerned about the low profit associated with the tools uct line and is considering dropping this product line. Allocated fixed costs are assigned to product lines based on floor space used by each product line (measured in square feet), resulting in the following percentages for garden supplies, tools, and paint, respectively: 20 percent, 50 percent, and 30 percent. If the tools product line is eliminated, total allocated fixed costs will be assigned as follows: 62.5 percent to garden supplies, and 37.5 percent to paint. All variable and direct fixed costs for the tools product line will be eliminated. Required: Focus Required: 1. Perform differential analysis using the format presented in Figure 4.5 "Product Line Differential Analysis for Barbeque Company". Assume keeping all product lines is Alternative 1. and dropping the tools product line is Alternative 2. 2. Which alternative is best? Explain. 3. Summarize the result of dropping the tools product line using the format presented in Figure 4.6 "Summary of Differential Analysis for Barbeque Company". 4. Assume the space available from dropping the tools product line can be used by the paint product line, resulting in increased revenues for paint of $12,000 and increased variable costs for paint of $4,000. No additional direct fixed costs would be incurred, and 80 percent of allocated fixed costs would be assigned to paint and 20 percent assigned to garden supplies. Should Hal's Hardware drop the tools product line and use the freed-up space to expand the paint product line? (Hint: Prepare a differential analysis using the format presented in Figure 4.5 "Product Line Differential Analysis for Barbeque Company" to find the answer. Alternative 1 assumes all product lines are kept, and Alternative 2 assumes the tools product line is dropped with a corresponding expansion of the paint product line.) Figure 4.5 Income Statement for Barbeque Company Product Lines Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Gas Barbecues $450,000 110,000 $340,000 60,000 90,000 $190,000 Charcoal Barbecues $ 90,000 40,000 $ 50,000 40,000 18,000 $ (8,000) Barbecue Accessories $60,000 15,000 $45,000 16,000 12,000 $17,000 Total $600,000 165,000 $435,000 116,000 120,000 $199,000 *Includes cost of goods sold and other variable costs. Panel A: Alternative 1 (keep all product lines) Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Gas Barbecues $450,000 110,000 $340,000 60,000 90,000 $190,000 Charcoal Barbecues $90,000 40,000 $50,000 40,000 18,000 $( 8,000) Barbecue Accessories $60,000 15,000 $45,000 16,000 12,000 $17,000 Total $600,000 165,000 $435,000 116,000 120,000 $199,000 Panel B: Alternative 2 (drop the charcoal barbecues line) Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Gas Barbecues $450,000 110,000 $340,000 60,000 105,882 $174,118 Barbecue Accessories $60,000 15,000 $45,000 16,000 14,1186 $14,882 Total $510,000 125,000 $385,000 76,000 120,000 $189,000 Panel C: Dif jal Analysis Panel C: Differential Analysis Alternative 1 Total (keep all product lines; panel A) $600,000 165,000 $435,000 116,000 120,000 $199,000 Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit Alternative 2 Total (drop charcoal barbecues; panel B) $510,000 125,000 $385,000 76,000 120,000 $189,000 Differential Amount $90,000 40,000 $50,000 Alternative 1 Is Higher Higher Higher Higher 40,000 0 $10,000 Higher a $105,882 = ($450,000 - $510,000) $120,000. b$14,118 = ($60,000 = $510,000) $120,000. The Differential Amount column in panel C of Figure 4.6 "Product Line Differential