Question

Please check my answers for tasks 2, 3, and 4, and add wording as needed. If you can double check for me the answers for number one would be great also. Thank you.

Barbecue Industries produces two products, Barbecue sauce and Barbecue seasoning. Information relating to the products for October is as follows: Units produced and sold Selling price per unit Variable expenses per unit Barbecue Barbecue Sauce Seasoning 20,000 25,000 $16 $9 $3 $8 Direct fixed expenses by product Barbecue Sauce Barbecue Seasoning $80,000 $100,000 Common Fixed Expenses $120,000 Required: 1. Design a segmented income statement showing the 2 product costs and a company total column. The segmented income statement should be developed to assist management in the decision making of questions listed in 2-4 below. Use only cell references for #1 to develop your numeric part of the segmented income statement. Barbecue Industries Segmented Income Statement For the Month Ended October 31, 2018 Sales Revenue Variable cost Direct Fixed expenses Profit Common Fixed expesne Net Loss Barbecue Barbecue Barbecue Industries Sauce Seasoning Total $320,000 $200,000 $520,000 $180,000 $75,000 $255,000 $80,000 $100,000 $180,000 $60,000 $25,000 $85,000 $120,000 ($35,000) 2. What would be the dollar effect on the company's profit if Barbecue Sauce is dropped? Provide the overall change in income and the impact positive or negative on company income. If Barbeque Sauce is dropped net loss will increase by $60,000. Net loss will be $95,000 3. What would be the dollar effect on the company's profit if Barbecue Seasoning is dropped? Provide the overall change in income and the impact positive or negative on company income. If the Barbeque Seasoning is Dropped, net loss will increase by $25,000. Net Loss for the Company will be $60,000 4. Would you recommend that Barbecue Industries drop Barbecue Sauce or Barbecue Seasoning? Why or why not? I would recommend to drop Barbeque Sauce so the net loss is less for Barbeque Seasoining.

Answer 1

1. The no.1 is correctly solved in all aspects
2. If Barbeque sauce is dropped, then, only Barbeque seasoning will be produced.

The reported segment profit of Barbeque seasoning in requirement 1 is $25,000. The entire common expenses will be adjusted to this only.

The net income(loss) = 25,000 – 120,000 = $ (95,000)

The net loss will increase by 95,000 – 35,000 = $ 60,000

3. If Barbeque seasoning is dropped, then, only Barbeque sauce will be produced.

The reported segment profit of Barbeque sauce in requirement 1 is $60,000. The entire common expenses will be adjusted to this only.

The net income(loss) = 60,000 – 120,000 = $ (60,000)

The net loss will increase by 60,000 – 35,000 = $ 25,000

4. Barbeque seasoning should be dropped as the net loss will only decrease by $ 25,000 compared to $ 60,000 when Barbeque sauce is dropped

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