Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Part 1: John's Fancy Chocolate Shop has two product lines; milk chocolate bars and chocolate covered almonds. His company is not doing as well as
Part 1: John's Fancy Chocolate Shop has two product lines; milk chocolate bars and chocolate covered almonds. His company is not doing as well as he hoped as shown in the following income statement Sales 100,000 Variable Expenses 60,000 Fixed Expenses 50,000 Operating Loss (10,000) Sales for chocolate bars and chocolate almonds are $60,000 and $40,000, respectively. Variable expenses for chocolate almonds are $25,000. Since chocolate almonds is a newer product, the company has been advertising more aggressively. Therefore, the traceable fixed costs for this product line are $30,000. Corporate fixed costs total $10,000. Required: What is the impact to operating income if the company were to drop the chocolate almonds product line? Should the company drop the product line? (4 marks) Part 2: Bob Co. manufactures three products from a common input in a joint processing operation. All units of all three products can be sold at the split-off point. Alternatively, all three products can be further processed and all units after further processing can be sold. Information about the products is as follows: Product A B Allocated costs at split-off $50,000 $90,000 $60,000 Sales values at split-off $100,000 $180,000 $120,000 Further processing costs $70,000 $80,000 $24,000 Sales values after furthering processing $160,000 $300,000 $150,000 Required: Which products should be sold at the split-off point and which should be further processed and sold after further processing? Show all of your work
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started