Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Diego Company manufactures one product that is sold for $72 per unit in two geographic regionsthe East and West regions. The following information pertains to

Diego Company manufactures one product that is sold for $72 per unit in two geographic regionsthe East and West regions. The following information pertains to the companys first year of operations in which it produced 43,000 units and sold 38,000 units.

Variable costs per unit:
Manufacturing:
Direct materials $ 22
Direct labor $ 14
Variable manufacturing overhead $ 3
Variable selling and administrative $ 5
Fixed costs per year:
Fixed manufacturing overhead $ 774,000
Fixed selling and administrative expense $ 346,000

The company sold 28,000 units in the East region and 10,000 units in the West region. It determined that $170,000 of its fixed selling and administrative expense is traceable to the West region, $120,000 is traceable to the East region, and the remaining $56,000 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.

Required :

image text in transcribed

image text in transcribed

image text in transcribed

9. If the sales volumes in the East and West regions had been reversed, what would be the company's overall break-even point in unit sales? Answer is complete but not entirely correct. Break even 2,879,918 units int 13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions Answer is not complete Income Statement Total Compan West East $2,736,000 2,016,000720,000 1,672,0001,232,000 440,000 Sales Variable expenses Contribution margin Traceable fixed expenses Region segment margin Common regions Net operating income 784,000 280,000 1,064,000 346,000 718,000 $784,000280,000 fixed expenses not traceable to 774,000 $ (56,000) 15. Assume the West region invests $33,000 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? Answer is complete but not entirely correct. decrease by 33,000

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

Step: 3

blur-text-image

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

Auditing Compensation And Benefits Programs

Authors: Kelli W. Vito

1st Edition

0894136720, 978-0894136726

More Books

Students also viewed these Accounting questions

Question

Discuss the key people management challenges that Dorian faced.

Answered: 1 week ago

Question

How fast should bidder managers move into the target?

Answered: 1 week ago