Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6656b96a69d6a_5946656b96a0a008.jpg)
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6656b96b1317f_5946656b96aa6983.jpg)
Transcribed Image Text:
Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting Intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented Income statement shown below: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Total Company $840,000 557,200 282,800 264,000 Commercial $ 280,000 154,000 126,000 116,000 Residential $ 560,000 403,200 156,800 148,000 $ 18,800 $ 10,000 $ 8,800 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $78,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $62,000 of fixed expenses that would disappear if the Commercial segment is dropped, and $40,000 of fixed expenses that would disappear if the Residential segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting Intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented Income statement shown below: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Total Company $840,000 557,200 282,800 264,000 Commercial $ 280,000 154,000 126,000 116,000 Residential $ 560,000 403,200 156,800 148,000 $ 18,800 $ 10,000 $ 8,800 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $78,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $62,000 of fixed expenses that would disappear if the Commercial segment is dropped, and $40,000 of fixed expenses that would disappear if the Residential segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Have computers eliminated the need to analyze transactions? Explain.
-
The performance of the Tripie Crown Chemical Division of Industrial Chemicals Ltd is appraised by the residual income method, and the divisional manager, Dr Williams, has the power to dispose of...
-
1. What further methods could have been used to generate ideas for the identification part of the risk process? 2. How scientific can the method that was used to rank the risks claim to be? 3. What...
-
A Company's purchases budget shows the following purchases for the coming three months: January $12,040 February $14,150 March $10,970 Payments for purchases are expected to be made 50% in the month...
-
5.An insurance agent is trying to sell you an immediate retirement annuity, which for a lump-sum fee paid today will provide you with $50,000 every year for the next 20 years. You currently earn 8...
-
Explain THREE manufacturing processes involved in fabrication of a pressure vessels (from metals/alloys). Hint: Elaborate on specific techniques used for shaping and joining materials to ensure...
-
Cabell Products is a division of a major corporation. Last year the division had total sales of $ 2 5 , 3 2 0 , 0 0 0 , net operating income of $ 1 , 9 2 4 , 3 2 0 , and average operating assets of $...
-
what are common uses for pivot tables in excel for the container logistics industry? Explain
-
What is at least 3 challenges leaders must face in emergency management. How can these challenges be overcome. Suggested areas to evaluate could include personnel, training, technology, funding, etc
-
(a) Explain the significance of carbon equivalent and chromium equivalent with regard to welding processes. (b) How to control sensitization in welding of stainless steel by controlling carbon and...
-
Let's say we approximated f(x) = In(sin(x)) with a 3rd degree Taylor polynomial centered at c = "2. Which of the following x-values would the poynomial provide the best estimate for? Why? 9. %3D a) 0...
-
Compare and contrast the following techniques based on costs and benefits: test data method base case system evaluation tracing integrated test facility parallel simulation
-
The ledger of Tombert Company has the Following work in process account Production records show that there were 700 units in the beginning inventory, 30% complete, 1,100 units started, and 1,300...
-
What is a run-to-run control?
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App