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?