Question

I need a help please. Thank you.

Help Save & Exit The Foundational 15 (L07-1, LO7-2, L07-3, LO7-4, LO7-5) The following information applies to the questions displayed below.) 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 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense EN $800,000 $496,000 The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product,

Answer 1

Requirement 7-13: Prepare the income statement as follows

Income Statement
Particulars	Total	East	West
Sales Revenue	$2,800,000	$2,000,000	$800,000
Deduct: Variable Expenses	$1,540,000	$1,100,000	$440,000
Contribution margin	$1,260,000	$900,000	$360,000
Deduct: Traceable fixed expenses	$400,000	$150,000	$250,000
Region segment margin	$860,000	$750,000	$110,000
Common fixed costs not traceable to regions	$896,000
Net operating loss	($36,000)

Notes:

Particulars	East	West
Sales Revenue:
(25,000 units × $80)	$2,000,000
(10,000 units × $80)		$800,000
Variable Expenses:
(25,000 units × ($24 + $14 + $2 + $4))	$1,100,000
(10,000 units × ($24 + $14 + $2 + $4))		$440,000
Common fixed costs = $800,000 + $96,000

Requirement 7-14: Compute the impact on profit as follows

Particulars	Amount
Lost west region segment margin	$110,000
Deduct: Increase in contribution margin of East ($900,000 × 5%)	$45,000
Profit will decrease by	$65,000

Requirement 7-15: Compute the impact on profit as follows

Particulars	Amount
Increase in contribution margin ($360,000 × 20%)	$72,000
Deduct: Advertising costs	($30,000)
Profit will increase by	$42,000