Construct an excel spreadsheet to solve requirement

Assignment Help Managerial Accounting
Reference no: EM132787847

Benchmark - Decision Making and Capital Budgeting

Problem: Closing an Unprofitable Department

1. Income (loss) from closure $(12,800)
Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single-store loca¬tion in suburban Des Moines. Although the company has been very profitable over the years, manage¬ment has seen a significant decline in wallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeply discounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow.

 

Paint and
Supplies

Carpeting

Wallpaper

Sales ........................................................

$380,000

$460,000

$140,000

Variable costs .............................................................

$228,000

$322,000

$112,000

Fixed costs..................................................

56,000

75,000

45.000

Total costs ..............................................................

$284,000

$397,000

$157,000

Operating income (loss) ..............................................

$ 96,000

$ 63,000

$ (17.000)

Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line is dropped, the following changes are expected to occur:
• The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet. Sales of carpet are expected to increase by $120,000, and the line's overall con¬tribution margin ratio will rise by five percentage points.
• Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred.
• Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent.
• The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line.

Required:

1. Should Tipton close its wallpaper operation? Show computations to support your answer.

2. Assume that Tipton's wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated this additional information in making the decision?

3. What advantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deeply discounted prices-prices far below what Tipton can offer?

4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. Show how the solution will change if the following information changes: sales were $400,000, $450,000, and $130,000, for paint and supplies, carpeting, and wallpaper, respectively.

Attachment:- Benchmark.rar

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The assignment is a calculation assignment wherein profitability of the business with changes in one segment have been analysed under different scenario.

Reference no: EM132787847

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len2787847

2/5/2021 11:35:30 PM

Complete all items for Problem 14-47 in the textbook. To complete all parts of the problems you should prepare an Excel workbook and Word document. You may not earn full points if you do not show your work in detail. Provide supporting responses either as part of the Excel document or as a separate Word document (450 words), being sure to properly label each response. At least two external sources should be cited, not including a textbook. Prepare this assignment according to the guidelines found in the APA Style Guide, (see attached) An abstract is not required.

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