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Webber, Inc has two divisions, the computer division and the television division. The company's segmented contribution income statement is as follows: Weber Company Income Statement
Webber, Inc has two divisions, the computer division and the television division. The company's segmented contribution income statement is as follows: Weber Company Income Statement Company Television Sales $ 500,000 $ 300,000 Variable costs 230,000 150,000 CM 270,000 150,000 Traceable FC 170,000 90,000 Division margin 100,000 $ 60,000 Common costs 25,000 Net operating Income $ 75,000 Computer $ 200,000 80,000 120,000 80,000 $ 40,000 a. Compute the companywide break-even point in sales for Webber, Inc. b. Webber's Television Division has two product lines: Plasma and Big Screen. Fixed costs traceable to the Plasma product line are $45,000 and $35,000 to the Big Screen product line. Additionally, variable costs of $95,000 are directly traceable to the Plasma product line and $55,000 are directly traceable to the Big Screen product line of the Television Division. The remaining $10,000 is not directly traceable to either product. Complete the Segment Income Statement for the Television Division. Sales for Plasma televisions are $200,000 and for Big Screen televisions are $100,000. Income Statement Television Division Plasma TVs Big Screen TVs Sales Variable costs Traceable FC Product line margin Common costs Divisional margin c. Compute the break-even point in dollars for the Plasma TV Segment. d. Webber has decided to spend an additional $5,000 in advertising costs for the television division and believes that the sales of each product line will increase by 5%. Compute the expected product line margin for each product and the divisional margin for the Television Division. (Do the products first!) Plasma TVs Big Screen TVs TV Division Contribution margin (new) Traceable fixed costs Product line margin (new) Common costs Divisional margin e. Should Webber spend the additional $5,000 in advertising costs? Why or why not
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