Reference no: EM132871694

Problem - Gorman Nurseries Inc. grows poinsettias and fruit trees in a greenhouse/nursery operation. The following information was provided for the coming year. A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $146,000 for the poinsettia line and $87,000 for the fruit tree line. Common fixed overhead for the nursery operation was estimated to be $800,000; common selling and administrative expense was estimated to be $450,000.

Prepare a segmented income statement for Gorman Nurseries for the coming year, using variable costing.

Refer to the information for Hickory Company above. Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include 80% of parquet's machine rent and all of parquet's supervision salaries.

List the alternatives being considered with respect to the parquet flooring line.