Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

[The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $73 per unit in two geographic regionsthe

[The following information applies to the questions displayed below.]

Diego Company manufactures one product that is sold for $73 per unit in two geographic regionsthe East and West regions. The following information pertains to the companys first year of operations in which it produced 44,000 units and sold 39,000 units.

Variable costs per unit:

Manufacturing:

Direct materials $ 23

Direct labor $ 16

Variable manufacturing overhead $ 2

Variable selling and administrative $ 4

Fixed costs per year:

Fixed manufacturing overhead $ 748,000

Fixed selling and administrative expenses $ 400,000

The company sold 29,000 units in the East region and 10,000 units in the West region. It determined that $180,000 of its fixed selling and administrative expenses is traceable to the West region, $130,000 is traceable to the East region, and the remaining $90,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

1. If the sales volumes in the East and West regions had been reversed, what would be the companys overall break-even point in unit sales?

2. What would have been the companys variable costing net operating income (loss) if it had produced and sold 39,000 units?

3. What would have been the companys absorption costing net operating income (loss) if it had produced and sold 39,000 units?

4. If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?

5. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

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

Accounting concepts and applications

Authors: Albrecht Stice, Stice Swain

11th Edition

978-0538750196, 538745487, 538750197, 978-0538745482

More Books

Students also viewed these Accounting questions

Question

What is quality of work life ?

Answered: 1 week ago

Question

What is meant by Career Planning and development ?

Answered: 1 week ago

Question

What are Fringe Benefits ? List out some.

Answered: 1 week ago