McNulty, Inc, produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 20 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost Manufacturing overhead for year 1 totaled $1,005,000. Overhead is allocated to products based on direct labor cost Data for year 1 show the following Sales revenue Direct materials Direct labor Chairs $1,212,100 684,000 180,000 Desks $2,781,250 1,000,000 490,000 Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. 3-2. Which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $850,000 The revenue and costs for desks are expected to be the same as last year What is the estimated margin for desks in year 2? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Rg Based on the CFO's new policy, calculate the profit margin for both chairs and desks Profit Margin % Charts Desks % Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. a-2. Which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $850,000 The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? Complete this question by entering your answers in the tabs below. Reg AID Reg A2 Reqs Based on the CFO's new policy, calculate the profit margin for both chairs and desks, Profit Margin % Chairs Desks Renat Req A2 > Complete this question by entering your answers in the tabs below. Reg A1 Req he ReqB Which of the two products should be dropped? Chairs Desks Complete this question by entering your answers in the tabs below. Req A1 Reg A2 Rel B Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $850,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) Show less Estimated margin for desks - Year 2 %
