Homework Answers
a.Company wide allocated costs will not be avoided when the division is closed
Hence, Income will increase by 84,000-78,000 = $6,000
Yes, should be eliminated
b.Income in income = increase in contribution margin as fixed costs remain constant
= Revenue – Fuel Expenses
= 24,000 – 2400
= $21,600
No, should not be eliminated
c.Minimum amount of revenue = Avoidable fixed costs/Contribution Margin ratio
= (210,000+42,000+24000)/0.9
= $306,666.67
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West Division Income Statement for Year3 $ 300, 000 (210, 000) (30, 000) (42, 000) (24,...
Return to question Dudley Transport Company divides its operations into four divisions. A recent ...
Return to question Dudley Transport Company divides its operations into four divisions. A recent income statement for its West Division follows: West Division Income Statement for the Year 2019 Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs (210,000) (30,800) (42,e00) (24,000) 78,000 (84,000) Net loss Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase...
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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement:
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Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as...
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Coolbrook Company has the following information available for the past year: River Division Stream Division Sales...
Coolbrook Company has the following information available for
the past year:
River Division
Stream Division
Sales revenue
$
1,210,000
$
1,814,000
Cost of goods sold and operating expenses
886,000
1,283,000
Net operating income
$
324,000
$
531,000
Average invested assets
$
1,190,000
$
1,560,000
The company’s hurdle rate is 6.26 percent.
b. Operating income decreases by 8 percent. River Division Stream Division ROI Residual Income (Loss) c. The company invests $248,000 in each division, an amount that generates $108,000 additional...
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Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. RUNDLE TRANSPORT COMPANY West Division Income Statement for Year 3 Revenue Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs Net loss $ 620,000 (470,000) (62,000) ( 82,000) (52,000) (142,000) $(188,000) Required a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able...
Division Central East West Total Company $ 1,535,000 648,000 0 0 0 Sales Variable expenses Contribution margin Traceable fixed expenses Divisional segment margin Common fixed expenses not traceable to divisions Net operating loss 887,000 788,000 99,000 $ 10,500 88,500 0 $ 0 $ 0 $ $ Reg 1 Req 2A Req 2B The Marketing Department has proposed increasing the West Division's monthly advertising by $24,000 based on the belief that it would increase that division's sales by 15%. Assuming these...
Part 5-Decentralization (13 pts) Jenny is the president of the West division of Newton Inc. In December she reviews the division's projected accounting statements for the year. If she does nothing, she expects the division to have $5 million in revenue, $2.4 million in variable costs, and $1.6 million in fixed costs, on volume of 100,000 units. The division has $6 million in assets. Newton has a cost of capital of 12% i-4 pts) Calculate the projected value of the...
Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating incone (less) $ 1.783.000 577,918 1.125.90 1,238, cee $ (112,910) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: West $590,000 Sales Variable expenses as a...
Coolbrook Company has the following information available for
the past year:
River Division
Stream Division
Sales revenue
$
1,210,000
$
1,814,000
Cost of goods sold and operating expenses
886,000
1,283,000
Net operating income
$
324,000
$
531,000
Average invested assets
$
1,190,000
$
1,560,000
The company’s hurdle rate is 6.26 percent.
b. Operating income decreases by 8 percent. River Division Stream Division ROI Residual Income (Loss) c. The company invests $248,000 in each division, an amount that generates $108,000 additional...
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