E7-12 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2, 7-5) Anderson Publishing has two divisions: Book Publishing & Magazine Publishing. The Magazine division has been losing money for the ast 5 years and Anderson is considering eliminating that division. Anderson's information about the two divisions is as follows: Book Division $ 8,060,000 Magazine Division $ 3,410,000 Sales Revenue Cost of Goods sold Variable costs Fixed costs Gross Profit Operating Expenses Variable Pixed Net income 2,260,000 1,103,500 $4,696,500 1,126,600 1,267,000 $ 1,016,400 Total $11,470,000 3,386,600 2,370,500 $ 5,712,900 161,000 2,942,000 $1,593,500 236,100 397,100 1,203,500 4, 145,500 S423,200) $ 1,170,300 Only 20 percent of the fixed manufacturing costs and 60 percent of the fixed operating expenses are directly attribute to each division. The remainder are common or shared between the two divisions. Required: 1. Present the financial information in the form of a segmented income statement (using the contribution margin approach). 2. What will be the impact on net income if the Magazine Division is eliminated? E7-14 (Algo) Analyzing Sell-or-Process-Further Decision (LO 7-2, 7-6) Wholesome Dairy processes milk. The cost of the milk processing is $1,330,000. Wholesome is looking to increase its net income and is exploring the possibility of expanding its products to include cream and/or ice cream. It takes 2 gallons of milk to make a half gallon of ice cream. MOTION Processing Product Milk Ice Cream Units Produced Selling Prien 790,000 gallonn $3.05 por gallon 6.13 per hale gallon 60.28 per half gallon Required: 1. How many half gallons of ice cream can Wholesome make? 2. What are the additional processing costs to convert the milk to ice cream? 3. Should Wholesome sell the milk or process it further and sell ice cream? E7-14 (Algo) Analyzing Sell-or-Process-Further Decision (LO 7-2, 7-6) Wholesome Dairy processes milk. The cost of the milk processing is $1,330,000. Wholesome is looking to increase its net income and is exploring the possibility of expanding its products to include cream and/or ice cream. It takes 2 gallons of milk to make a half gallon of ice cream Additional Processing CONE $ 0.28 per half gallon Product Milk Ice Cream Units Produced Selling Price 798, 000 gallons $3.05 per gallon 6.13 per hale gallon Required: 1. How many half gallons of ice cream can Wholesome make? 2. What are the additional processing costs to convert the milk to ice cream? 3. Should Wholesome sell the milk or process it further and sell ice cream? anterinn your answers in the tabs below. E7-16 (Algo) Making Decisions Involving Constrained Resource [LO 7-2, 7-7) Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows: Sales price Variable coats per unit Pixed cost per unit Required number of labor hours Product $36.00 18.50 4.00 1.25 Products $66.00 21.00 4.00 Product c $76.00 38.50 4.00 2.50 2.00 Cordova currently is limited to 38,500 labor hours per month. Cordova's marketing department has determined the following demand for its products: Product Products Produto 10,000 units 12.000 units 4.000 units Required: Given the company's limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences: the product with first preference should be entered first. Round your answers to the nearest whole number.) 7-13 (Algo) Analyzing Special-Order Decision [LO 7-2, 7-3] wonwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear Vista (CV), follows: Per Unit $46.50 15.00 10.00 Sales price Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead Total manufacturing cost 6.00 5.00 $36.00 Suppose that Ironwood has been approached about producing a special order for 2,300 units of custom CV sunglasses for a new semiprofessional volleyball league. All units in the special order would be produced in the league's signature colors with a specially designed logo emblem attached to the side of the glasses. The league has offered to pay $44.00 per unit in the special order. Additional costs for the special order total $1.00 per unit for mixing the special frame color and purchasing the emblem with the league's logo that will be attached to the glasses. Required: 1. Assume Ironwood has the idle capacity necessary to accommodate the special order. Calculate the additional contribution margin 2-a. Calculate the current contribution margin per unit. 2-b. Suppose Ironwood is currently operating its production facility at full capacity and accepting the special order would mean reducing production of its regular CV model. Should Ironwood accept the special order in this case? 3. Calculate the special order price per unit at which Ironwood is indifferent between accepting or rejecting the special order. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 28 Regs Assume Ironwood has the idle capacity necessary to accommodate the special order. Calculate the additional contribution
