Question :
142.Sandford Electronics sells desktops and notebook computers. Currently, the desktop : 1302798
142.Sandford Electronics sells desktops and notebook computers. Currently, the desktop product line takes up approximately 50 percent of the company’s retail floor space. The president of the company is trying to decide whether the company should continue offering desktops or just concentrate on notebooks. If the desktop product line is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of notebooks will increase by 10 percent. Allocated fixed costs are assigned based on labor hours.
NotebooksDesktopsTotal
Sales $1,200,000 $800,000 $2,000,000
Less cost of goods sold 700,000 500,000 1,200,000
Contribution margin 500,000 300,000 800,000
Less direct fixed costs:
Salaries 175,000 175,000 350,000
Other60,000 60,000 120,000
Less allocated fixed costs:
Rent14,118 9,882 24,000
Insurance3,529 2,471 6,000
Cleaning4,117 2,883 7,000
President’s salary76,470 53,530 130,000
Other 7,058 4,942 12,000
Total costs 340,292 308,708 649,000
Net income $ 159,708 ($ 8,708) $ 151,000
Prepare an incremental analysis in good form to determine the incremental effect on net incomeof discontinuing the desktop computer line.
143.Dairy Fresh makes a variety of dairy products. During June, 45,000 gallons of raw milk wereprocessed at a joint cost of $36,000. This produced 36,000 gallons of skim milk and 4,000 gallons of cream. The cream could be processed further into butter and the skim milk could be processed further into farmer’s cheese. Information on these items follows:
Sales ValueEstimated FurtherSales Value After
At Split-off PointProcessing CostProcessing
Skim Milk $94,500 $10,000 $115,000
Cream 40,500 40,000 70,000
a.Assume that the joint cost is allocated to the products based on the physical quantity of output of each product. How much joint cost should be assigned to each product?
b.How much joint cost should be assigned to each product if the relative sales value allocation method is used?
c.Which products should be processed further?
144.Sanders Products produces two joint products,A and B. Prior to the split-off point, the company incurredcosts of $12,000. Product A weighs 10 pounds and product B weighs 30 pounds. Product A sells for $50 per pound and product B sells for $25 per pound. Based on a physical measure of output, allocate joint costs to products A and B.
145.Mexo Products produces two joint products, A and B. Prior to the split-off point, the company incurred costs of $12,000. Product A weighs 100 pounds and product B weighs 300 pounds. Product A sells for $50 per pound and product B sells for $25 per pound. Mexo uses a physical measure of output to allocate joint costs to products A and B.
Comment on the profitability and recommend if the products should be sold at the indicated prices or not.
146.Mexo Products produces two joint products, A and B. Prior to the split-off point, the company incurred costs of $12,000. Product A weighs 100 pounds and product B weighs 300 pounds. Product A sells for $50 per pound and product B sells for $25 per pound.
a.Based on relative sales values at the split-off point, allocate joint costs to the two products.
b.Under what condition will the cost allocated using relative sales values be greater than the selling price of a joint product?
