Reference no: EM13851471
Flash in a Flash sells three types of digital memory devices: Secure Digital (SD), CompactFlash (CF), and Memory Sticks (MS).
The following table reveals average per unit selling price, average per unit variable product cost, and the number of units sold during a recent period:
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Selling Price |
|
Variable Product Cost |
|
Units Sold |
| SD |
$22 |
|
$15 |
|
200,000 |
| CF |
$20 |
|
$12 |
|
150,000 |
| MS |
$36 |
|
$30 |
|
360,000 |
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"Each product is managed by a product manager who is compensated with a fixed salary, as follows:
"
SD $175,000
CF $180,000
MS $166,000
The product managers are each authorized to engage a sales strategy. SD's strategy is to rely exclusively on a manufacturer representative. The manufacturer representative is paid 7% of sales. CF's strategy is to utilize a salaried sales manager and print media advertising campaign at a fixed cost of $290,000. MS's strategy is use an internet site at a fixed cost of $250,000, plus $0.10 per click. The click rate is 50 times the number of units sold.
Of the above costs, the product manager's salary is considered to be an uncontrollable fixed cost for each unit. The only other costs are $275,000 of general and administrative costs incurred at the corporate level that are not traced to any particular product.
(a) Prepare a contribution income statement for each segment, revealing the segment margin.
(b) Prepare a "company total" contribution income statement for all three segments.
(c) Evaluate Flash in a Flash's results, and comment as to why corporate management should look at segmented results in addition to overall corporate performance.
GoWay manufacturers and sells a portable battery-powered transportation device that can be stored in a backpack. The device usually sells for $5,000 per unit. The company normally sells units as quickly as manufactured and does not maintain a finished goods inventory. However, during the most recent year, the company produced 10,000 units, but only sold 9,000. A military customer has requested to buy the other 1,000 units for delivery on December 31 of the current year. The offered price is $4,000 per unit for all 1,000 units. Below are absorption-costing based calculations of ending inventory and net income, on the 9,000 units already sold.
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