Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that

image text in transcribed

Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch Revenues Variable costs Fixed costs allocated to products Operating profit (loss) $ 383,600 237,600 153,230 $ (7,230) 44 Inch $ 587,000 54 Inch $ 364,800 291,680 231,464 169,500 144,806 $ 63,856 $ 50,494 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop Status Quo Difference 36-Inch Fan Revenue Less variable costs Contribution margin Less fixed costs Operating profit

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

Core Concepts Of Accounting Information Systems

Authors: Nancy A. Bagranoff, Mark G. Simkin, Carolyn Strand Norman

11th Edition

9780470507025, 0470507020

More Books

Students also viewed these Accounting questions