Dalton Corporation is analyzing product line feasibility. They allocate corporate overhead of $1,800 based on Direct Labor
Question:
Dalton Corporation is analyzing product line feasibility. They allocate corporate overhead of
$1,800 based on Direct Labor dollars. The President believes he can increase corporate
performance by eliminating unprofitable products.
Product
A
Product
B
Product
C
Product
D
Net
Sales
1,
100
800
1,
250
1,
500
Direct
Labor
(
500)
(6
00)
(
400)
(
600)
Direct
Materia
ls
(
150)
(3
00)
(
125)
(
150)
a) Prepare a Contribution Margin Income Statement based on all four products and determine if
any product lines should be dropped.
b) Prepare a Contribution Margin Income Statement to show what would happen if Dalton does
drop a product line.
c) Does Dalton?s operational performance increase if they drop a product line?
d) Should Dalton drop their unprofitable product line(
MBA540 Homework Due Week 5 Dalton Corporation (5 points) Dalton Corporation is analyzing product line feasibility. They allocate corporate overhead of $1,800 based on Direct Labor dollars. The President believes he can increase corporate performance by eliminating unprofitable products. Net Sales Direct Labor Direct Material s Product A 1,1 00 (50 0) (15 0) Product B 8 00 (60 0) (30 0) Product C 1,2 50 (40 0) (12 5) Product D 1,5 00 (60 0) (15 0) a) Prepare a Contribution Margin Income Statement based on all four products and determine if any product lines should be dropped. b) Prepare a Contribution Margin Income Statement to show what would happen if Dalton does drop a product line. c) Does Dalton's operational performance increase if they drop a product line? d) Should Dalton drop their unprofitable product line(s)? e) What is this an example of? Quantum (11 points) Quantum currently allocates their repair and utility dollars to their assembly, fabricating, and finishing department using the direct method of service center cost allocation. Repair dollars are allocated using direct labor hours and utility dollars are allocated using square footage. a) Calculate the amounts to be allocated to the production departments using the direct method. b) Calculate the amounts to be allocated to the production departments using the step method. c) Write a memo to the President explaining the differences in the results Expert Answer:
