help please. Thanks PR 20-5A Segment variable costing income statement and effec

Question

help please.
Thanks

PR 20-5A Segment variable costing income statement and effect on income of Obj change in operations aldespin Company manufactures three sizes of camping tents-small (S), medium (MD, and large The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of margin, Size S, (L). Size S so that the entire plant capacity can continue to be used If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual EXCEL TEMPLATE fixed production costs and fixed operating expenses could be reduced by $46,080 and $32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of $34,560 for the rental of additional warehouse space would yield an additional 130% in size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M (Continued)

Explanation / Answer

Answer 1:

Answer 2:

Net impact on total income if size M is discontinued:

If size M is discontinued, income from operations of Valdespin company will be reduced by $ 146,360

This can also be known with following table:

Answer 3:

Proposal 3:

Increase in Sales of Size S by 130%

Increase in warehouse rental (fixed operating expense) by 34,560

Income Statement if Proposal 3 is accepted

Note 1 - Since increased production of Size S would utilize the plant facilities released by the discontinuance of Size M, fixed cost attributable to Size M is added to fixed cost of Size S.

Answer 4:

Changes in annual income if proposal 3 is accepted:

S M L Total Sales       6,68,000            7,37,300            9,56,160          23,61,460 Variable Cost: Variable Production Cost       3,00,000            3,57,120            4,37,760          10,94,880 Variable Operating Cost       1,32,480            1,55,500            1,95,840            4,83,820 Contribution Margin       2,35,520            2,24,680            3,22,560            7,82,760 Fixed Cost: Fixed Production Cost           74,880            1,38,250            1,72,800            3,85,930 Fixed Operating Cost           92,160            1,03,680            1,15,200            3,11,040 Income from Operations           68,480             (17,250)                34,560                85,790

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.