The segmented income statement for XYZ Company for the year ended December 31, 2016, tollows: XYZ COMPANY Segmented Income Statement For the Year Ended December 31. 2016 Total CompenyProduct A $ 305,000 146,000 Product B $ 118,000 51.000 Product C 182.000 6,000 Sales Variable axpenses Contribution margin Fixed expenses $ 605,000 273,000 332 159.0 280.000 $ 52.000 159.000 44,000 23,000 7.000 $ 29,000 Operaing income The company is concerned about the performance of product A, and you have been asked to analyze the situation and recommend to the president whether to continue or discontinue the product, During your investigation, you discover that certain fixed expenses are traceable directly to each product line as indicated here: al Company Product AProduct B Product C $100,000 Direct fixed expenses 573,000 59,000 $18,000 The remaining fixed expenses are considered to be corporate-wide expenses that have been allocated to each product line based on sales revenue. Required: a, What will be the effect of the decision to discontinue product A on operating income? b. Assume that product A is discontinued. Prepare a segmented income statement for the remaining products. Allocate corporate-wide fixed expenses as described. (Round intermediate calculations to 2 decimal places.) COMPAN Segmented Income Statement For the Year Ended December 31, 2016 Total Product B Product Variable expenses Contribution margin Direct foxed expenses Common foxed expenses c. Starting with the segmented income statement, use the information you discovered during your investigation to present a more appropriately designed segmented income statement ment For the Year Ended December 31, 2016 Total Product A A Product B Product Q Variable expenses Contribution margin Direct fxed expenses Segment margin Common foxed expenses erating incomeoss The Delmar Beverage Co. produces a premium root beer that is sold throughout its chain of restaurants in the Midwest. The company is currently p beer is available to restaurant customers by the mug, in bottles, or packaged in six-packs to take home. The selling price of a gallon of root beer averages S12, and cost accounting records indicate the following manufacturing costs per galon of root beer 1.593 gallons of root beer per day, which represents 70% of its manufacturing capacity. The root Raw materials Direct labor Variable overhead Fixed overhead 3.06 1.67 1.61 203 Total absorption cost S 8.3 In addition to the manufacturing costs just described, Delmar Beverage incurs an average cost of $1.05 per gallon to distribute the root beer to its restaurants. SaveMore, Inc., a chain of grocery stores, is interested in selling the premium root beer in gallon jugs throughout its stores in the St. Louis area during holiday periods and has offered to purchase root beer from Delmar Beverage at a price of $9.00 per gallon. SaveMore believes it could sell 682 gallons per day. If Delmar Beverage agrees to sell root beer to SaveMore, it estimates the average distribution cost will be $1.52 per gallon Required: a. Identify all the relevant costs that Delmar Beverage should consider in evaluating the special sales order from SavcMore? (Round your answers to 2 decimal places.) t labor ble overhead ixed overhead Total relevant costs per galan 000 b. How would Delmar Beverage's daily operating income be affected by the acceptance of this offer? (Round your answer to 2 decimal places.) decreased Assume that Delmar Beverage is currently producing 2,276 gallons of root beer daily. c-1. Identify all the relevant costs that Delmar Beverage should consider in evaluating the special sales order from SaveMore? (Round your answers to 2 decimal places.) Per rent sales Less variable costs Raw materials Direct labor Variable overhead Distribution 0.00 c-2. How would Delmar Beverage's daily operating income be affected by the acceptance of this offer? (Round your answer to 2 decimal places.)
