Calculate the effect on total company net income

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Reference no: EM13515601

Segmented income statement Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model:


BV19

HV41

MV12

Selling price per unit

$36

$60

$30

Contribution margin per unit

12

18

6

Units sold per month

4,000

2,000

6,000

Total contribution margin

$48,000

$36,000

$36,000

Direct fixed expenses.

21,600

17,100

24,300

Segment margin

$26,400

$18,900

$11,700

Allocated company fixed expenses

10,000

5,000

15,000

Operating income (loss)

$16,400

$13,900

($3,300)

Required:

a. Criticize the preceding presentation. On what basis does the $30,000 of company fixed expenses appear to be allocated?

b. Calculate the effect on total company net income if the MV12 model were discontinued.

c. Calculate the contribution margin ratio for each model.

d. If an advertising campaign focusing on a single model were to result in an increase of 5,000 units in the quantity of units sold, which model should be advertised? Explain your answer.

e. If an advertising campaign focusing on a single model were to result in an increase of $15,000 in revenues, which model should be advertised? Explain your answer.

Reference no: EM13515601

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