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At the end of the year, John needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He
At the end of the year, John needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively. Four-Wheelers Personal Watercraft Snowmobiles Sales $1,134,000 $1,415,000 $2,008,000 Payroll Maintenance Four-Wheelers Watercraft Snowmobiles Costs $95,000 $116,000 $250,000 $846,000 $1,134,000 $1,739,000 Number of employees 2 3 20 18 27 Maintenance hours 100 200 150 1,800 750 1,300 IT hours 150 40 220 800 1,250 900 (a) Use Excel to allocate the three support department costs to the three product lines using the reciprocal method. (Round answers to 2 decimal places, e.g. 15.25.) Costs 4-Wheelers EA $ $ Operating Units Watercraft $ Snowmobiles $ Total
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