prepare an income statement, Managerial Accounting

Adm2341 manufactures and sells four different products. The following data are extracted from the most recent financial statements:

 

Products

 

A

B

C

D

Sales

Cost of goods sold

   Direct materials

   Direct labour

   Manufacturing overhead

S&A expenses

Operating income

$2,500,000

 

300,000

500,000

     600,000

 300,000

800,000

$2,000,000

 

400,000

600,000

     800,000

300,000

(100,000)

$1,500,000

 

200,000

400,000

     900,000

150,000

(150,000)

$   4,000,000

 

900,000

1,600,000

  300,000

 500,000

700,000


For each product, 50% of manufacturing overhead is variable costs and variable S&A expenses are equal to 10% of sales. The remaining portion includes traceable and common fixed costs.

The company is considering disposing of the Product C since it has been consistently unprofitable for a number of years. Admw2341's Management team approached you for help and advice on this matter.
 
REQUIRED

1) Prepare an income statement showing the appropriate performance of each product.

2) Adm2341's Top management asked you to provide them with a "decision rule" they could apply regarding Product C. Identify any additional information needed to implement your "decision rule".

3) To rationalise your decision on Product C, you have collected the following data:

 a) If product C is eliminated, Product D annual sales will increase by $10%. The Variable cost structure and S&A fixed expenses will be unchanged.

 b) If Product C is eliminated, Product A annual sales will drop by 10 %. The  Variable cost structure and S&A fixed expenses will be unchanged.

 c) If Product C is dropped, the management of the company feels it can save annually a total of $200,000 of fixed manufacturing overhead and S&A expenses.

Do you recommend to Adm2341's Management to drop Product C? Why ?

Posted Date: 3/13/2013 2:39:56 AM | Location : United States







Related Discussions:- prepare an income statement, Assignment Help, Ask Question on prepare an income statement, Get Answer, Expert's Help, prepare an income statement Discussions

Write discussion on prepare an income statement
Your posts are moderated
Related Questions
Advantages of ratio analysis 1) Helpful in financial analysis: financial analysis is easier if accounting ratios are used to analyze the different financial statement relatio

Question: (a) The demand for the output of a certain company is very elastic and modern plant recently installed is capable of greatly increased production. Output at present

HGT Company initialized the accounting period with the following beginning balances:          During the accounting period, the company purchased $60,000 of raw materials and ended

#questihow do we use emuneration method in interger programing

Management Accounting 1) Which is concerned with provision of information to people within the organization to help them make better decisions? Management accounting is concer

Analysis of Credit File: Credit file is a compilation of each the relevant credit information of the customer. All the credit information collected throughout the credit informati


If a company creates sales to a number of customers on credit terms this will have to wait for two or still three months before its debtors pay that they owe. It means that the deb

Going rate or follow the crowd pricing:- In this method the firm price its products at the similar level as that of the competition. This method supposes that there will be no

Compute the equ units of production?