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/2024/06/665af2a87588b_392665af2a81a36d.jpg)
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/06/665af2a915a6d_392665af2a8a9b5a.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 $ 765,000 510,000 255,000 244,000 $11,000 Commercial $ 255,000 Residential $510,000 142,800 367,200 112,200 106,000 142,800 138,000 $ 6,200 $ 4,800 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 $85,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52.000 of fixed expenses that would disappear if the Commercial segment is dropped, and $30,000 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? < Prev 2 of 2 Next 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 $ 765,000 510,000 255,000 244,000 $11,000 Commercial $ 255,000 Residential $510,000 142,800 367,200 112,200 106,000 142,800 138,000 $ 6,200 $ 4,800 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 $85,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52.000 of fixed expenses that would disappear if the Commercial segment is dropped, and $30,000 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? < Prev 2 of 2 Next
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Hospitable Co. provides the following sales forecast for the next four months: The company wants to end each month with ending finished goods inventory equal to 25% of next months sales. Finished...
-
Let p and q represent the following simple statements. p: You are human. q: You have a tail. Write the following compound statement in symbolic form. Being human is necessary for not having a tail....
-
Consider the following two matrices: 0 Oi 9 1 0 19 0 = 1 and U= 0 0 4 13 11 ( 19 ) 19 a. Find a matrix A such that L and U are the LU decomposition of A. b. Solve the system Ax = b using the LU...
-
Why is it helpful to follow a project management methodology? What do you think about agile project management?
-
Matthews Corporation has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer...
-
For the inertial measurement system, which testing approaches would you use? When and why?
-
The relationship between the sampling risk of incorrect acceptance and the sample size of substantive tests is a. Inverse. b. Positive. c. Indeterminate. d. None of the above.
-
Which of the following sampling methods would be used to estimate a numerical measurement of a population, such as a dollar value? a. Discovery sampling. b. Sampling for variables. c. Sampling for...
-
Estimate damages for lost operation profit for years 3 through 5 from lost sales due to infringement as of June 30th, year 6, which is the estimated date of the completion of the patent infringement...
-
Suppose a firm has 19 million shares of common stock outstanding with a par value of \($1.00\) per share. The current market price per share is \($18.35\). The firm has outstanding debt with a par...
-
Using the sample project from this chapter, perform a sensitivity analysis (+/-10 basis-points) of r's effect on NPV, starting from its base value for this project of 9.40 percent. Which of the...
-
Which of the two procedures that we discussed in this chapter use the assumption that multiple uncertain inputs will move in tandem? a. Sensitivity analysis only b. Scenario analysis only c. Both...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App