Jalapenos! is based in Pleasant Hill, California. The merchandising company has
ID: 2648866 • Letter: J
Question
Jalapenos! is based in Pleasant Hill, California. The merchandising company has three divisions: Clothing, Food, and Spices. The Clothing division has two main product lines: T-shirts and sweatshirts. The company uses a shared warehousing facility. There are $50,000 in fixed warehousing costs each month, of which $40,000 are traceable to the three divisions based on the amount of square feet used. There is 100,000 square feet of warehouse space in the facility. The clothing division uses 60,000 square feet of the space, but 5,000 of that space isn't traceable to t-shirts or sweatshirts. Facts related to the divisions and products for the month ended October 31, 2012, follow:
Clothing Food Spices T-shirts Sweatshirts Square feet used 40,000 15,000 30,000 10,000 Sales revenue $300,000 $100,000 $150,000 $80,000 COGS (variable) $210,000 $60,000 $60,000 $32,000 Fixed selling expenses $7,000 $5,000 $3,000 $1,000 Variable selling expenses $9,000 $8,500 $11,000 $2,500 Requirements: 1. Calculate the rate per square foot for Warehousing. Calculate the traceable fixed costs for each division and for each product in the Clothing division. 2. Prepare an income statement for the company using the contribution margin approach. Calculate net income for the company, divisional segment margin for both divisions, and product segment margin for both products.Explanation / Answer
Calculation of traceable fixed costs ($ 50000) - Division-wise Clothing Traceable to clothing Food Spices Total Warehousing costs Sq foot used 55000 5000 30000 10000 100000 Sharing of costs (55:30:10:5) 27500 2500 15000 5000 50000 Rate per sq feet 0.5 0.5 0.5 0.5 Calculation of traceable fixed costs ($ 27500) - Product-wise T Shirts Sweat shirts Total Sq feet used 40000 15000 55000 sharing of costs (40:15) 20000 7500 27500 Rate per sq feet 0.5 0.5 0.5 Division-wise, product-wise Income statement for the month ended October 31, 2012 Amount in $ Clothing Division Total Food Spices Company Total T-shirts Sweatshirts 1 2 3 (1 + 2) 4 5 6 (3+4+5) Sales 300000 100000 400000 150000 80000 630000 Less : Variable expenses COGS 210000 60000 270000 60000 32000 362000 Variable selling expenses $9,000 $8,500 17500 $11,000 $2,500 31000 Total variable expenses $219,000 $68,500 287500 $71,000 $34,500 393000 Contribution $81,000 $31,500 112500 $79,000 $45,500 237000 Less: Fixed expenses Fixed selling expenses 7000 5000 12000 3000 1000 16000 Traceable Fixed warehousing expenses-Product-wise 20000 7500 27500 27500 Net income - Product-wise $54,000 $19,000 $73,000 $76,000 $44,500 193500 Traceable Fixed warehousing expenses-division- wise 2500 15000 5000 22500 Net income - Division-wise $70,500 $61,000 $39,500 171000
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