1.Diego is considering eliminating the West region because an internally generated report suggests the region’s total gross margin in the first year of operations was $50,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?
2. Assume the West region invests $38,000 in a new advertising
campaign in Year 2 that increases its unit sales by 20%. If all
else remains constant, what would be the profit impact of pursuing
the advertising campaign?
Variable cost per unit | 47 | =27+12+3+5 |
Unit Contribution margin | 30 | =77-47 |
1 | ||
Loss in Contribution margin of West | -300000 | =10000*30 |
Avoidable fixed selling and administrative expenses | 220000 | |
Increase in Contribution margin of East | 49500 | =33000*5%*30 |
Net change in profits | -30500 | |
Profits will decrease by 30500 | ||
2 | ||
Increase in Contribution margin of West | 60000 | =10000*20%*30 |
Less: Advertising expense | -38000 | |
Net change in profits | 22000 | |
Profits will increase by 22000 |
1.Diego is considering eliminating the West region because an internally generated report suggests the region’s total...
14. Diego is considering
eliminating the West region because an internally generated report
suggests the region’s total gross margin in the first year of
operations was $80,000 less than its traceable fixed selling and
administrative expenses. Diego believes that if it drops the West
region, the East region's sales will grow by 3% in Year 2. Using
the contribution approach for analyzing segment profitability and
assuming all else remains constant in Year 2, what would be the
profit impact of...
Diego Company manufactures one product that is sold for $77 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 48,000 units and sold 43,000 units. Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 12 Variable manufacturing overhead $ 3 Variable selling and administrative $ 5 Fixed costs per year: Fixed manufacturing overhead $ 864,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $72 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 55,000 units and sold 50,000 units. Variable costs per unit: Manufacturing: Direct materials $ 23 Direct labor $ 14 Variable manufacturing overhead $ 3 Variable selling and administrative $ 5 Fixed costs per year: Fixed manufacturing overhead $ 770,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $75 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 46,000 units and sold 42,000 units. Variable costs per unit: Manufacturing: Direct materials $ 25 Direct labor $ 20 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 644,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 49,000 units and sold 44,000 units. Variable costs per unit: Manufacturing: Direct materials $ 28 Direct labor $ 14 Variable manufacturing overhead $ 4 Variable selling and administrative $ 6 Fixed costs per year: Fixed manufacturing overhead $ 686,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $78 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 49,000 units and sold 44,000 units. Variable costs per unit: Manufacturing: Direct materials $ 28 Direct labor $ 14 Variable manufacturing overhead $ 4 Variable selling and administrative $ 6 Fixed costs per year: Fixed manufacturing overhead $ 686,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $75 per
unit in two geographic regions—the East and West regions. The
following information pertains to the company’s first year of
operations in which it produced 57,000 units and sold 52,000
units.
The company sold 36,000 units in the East region and 16,000
units in the West region. It determined that $310,000 of its fixed
selling and administrative expense is traceable to the West region,
$260,000 is traceable to the East...
Required information The Foundational 15 (LO6-1, LO6-2, LO6-3, LO6-4, LO6-5) The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $71 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 54,000 units and sold 49,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year:...
Diego Company manufactures one product that is sold for $75 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 46,000 units and sold 42,000 units. Variable costs per unit: Manufacturing: Direct materials $ 25 Direct labor $ 20 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 644,000 Fixed selling and administrative expense $...
Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 40,000 units and sold 35,000 units. Variable costs per unit: Manufacturing: Direct materials $ 24 Direct labor $ 14 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 800,000 Fixed selling and administrative expense $...