Question
Clapton Corporation produces and sells only two products that are referred to as Riffs and Hooks. Production is for order only, and no finished goods
Clapton Corporation produces and sells only two products that are referred to as Riffs and Hooks. Production is "for order" only, and no finished goods inventories are maintained; work in process inventories are negligible. The following data relate to last months operations: | ||
| ||
Riffs | Hooks | |
Sales | $910,000 | $870,000 |
Manufacturing costs: | ||
Materials | $81,000 | $78,000 |
Direct labor | $254,000 | $295,000 |
Overhead | $334,000 | $328,000 |
Selling expenses | $81,000 | $78,000 |
Administrative expenses | $108,000 | $83,000 |
$136,000 of the manufacturing overhead assigned to Riffs and $172,000 of that assigned to Hooks is traceable fixed expenses. The balance of the overhead is variable. Selling expenses consist entirely of commissions paid as a percentage of sales. Direct labor is completely variable. Administrative expenses are fixed and cannot be traced to the products but have been arbitrarily allocated to the products. | ||
| ||
Required: | 30 points | |
a. Prepare a segmented income statement, in total and for the two products. Use the contribution approach. Include percentage for the sales, variables expenses, and contribution margin for all three. Round the percentage to one decimal place | ||
b. Compute the companywide break-even point in dollars. | ||
c. Compute the Riffs break-even point in dollars. | ||
d. Compute the Hooks break-even point in dollars. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started