Managerial Accounting

Problem 1 [35% Pointsl - L03 Fajar Company manufactures product A, B and C. Sales and expenses data for the past month follow: Total Product A Product B Product C Sales 5 500,000 5 130,000 5 250,000 5 70,000 Variable expenses 205,000 75,000 100,000 30,000 Contribution Margin 295,000 105,000 150,000 40,000 Fixed expenses Advertising -traceable 108,000 32,500 55,000 20,500 Depreciation of special equipment 47,500 17,500 20,000 10,000 Line supervisors 9,500 3,000 3,500 3,000 General factory overhead ' 100,000 36.000 50.000 14.000 Total fixed expenses 265,000 NET OPERATING INCOME (LOSS) 30,000 Additional information: I Fajar Company (PO wants to analyze the loss of product C. FC also makes a recommendation as to whether or not the product should be discontinued. - Special equipment used to produce all products has no resale value. a General factory overhead is a common fixed cost. a If the product C is dropped, two line supervisors assigned to the product C would be discharged. I 66_F|N_RCOuestion.pdf Required: a. Should production and sale of the product C be discontinued? The company has no other use for the capacity now being used to produce the product C. Show your computation to support your answer! (5 points) b. Recast the above data in a format that would be more useful to FC in assessing the protability of all products! (10 points) c. Based on the answer of point b, a firm's advertising agency has proposed campaign targeted at boosting the revenues of product C. The ad campaign would cost 5 6,500. and advertising agency claim that it would increase product C revenues by S 28,000. Estimate the effect this ad campaign would have on product C segment margin and on the FC's overall net operating income! (5 points) d. Based on the original case of FC abOve, on total sales, net operating income and average operating assets. Operating assets, beginning and ending of month: $225,000 and $175,000. Compute ROI [return on investment)? What have you already achieved a satisfactory ROI? Give your analysis! (7.5 points) e. The calculating of ROI and Residual Income (RI) requires additional data, namely Expected Rate of Return {Expected ROR). Explain how use Expected ROR this! You may set Expected ROR yourself and compute Residual Income (RI) based on additional data of point d! (7.5 points) Problem 2 [30 Points! - L04 Division A has a product that can be sold either to outside market or Division B of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional prots. c A S E Division A: 1 2 3 Veried by. Tomm Andrian (D618!) and sent to Deartmem/Pro mm on JUNE I 9, 2021 Page 2 of4