Restate the segmented income statement

Assignment Help Managerial Accounting
Reference no: EM131692530

Glen's Cookies (GC) produces a variety of baked goods that it sells to grocery stores (the grocery channel) or to food service providers (the food service channel). GC is trying to analyze the profitability of its cookie line of products. GC charges the same prices and provides the same promotions to its customers, whether the customer was in the grocery store channel or the food service channel.

GC has recently studied the food service channel and has discovered that this channel can be further refined into specialty cookie shops and industrial providers (cafeterias, hospitals, etc.). GC noticed that sales dollars for its products were relatively constant, but that profits were declining. The company sensed that specialty cookie shops might be more profitable than industrial providers, but really didn't know.

Segmented Income Statements for cookies in the food service channel for last year looked like this:

Cost of Goods Sold includes $142,500 for ingredients, baking, and warehousing and $30,000 for picking, packing, and shipping. The cookies are the same across all segments, so the cost to produce is the same. However, Picking, Packing and Shipping costs vary and are based on the cost for a full pallet. Full pallets cost $75 to pick and ship, where individual orders cost $2.25 per case. There are 75 cases per pallet. Shipping details for last year were:

Specialty Cookie
  Shops Industrial Providers Total

Cases Shipped in Full Pallets

2,400 600

 3,000

Individual Cases

600 11,400

 12,000

Total Cases

3,000 12,000

 15,000

Selling and Admin costs are charged to the food service channel based on the estimated budget amounts. However, Merchandising Costs are the cost of point of sale display kits and cost $ 5.00 each. Last year 3,450 kits were delivered, 90 of them to the Specialty Cookie Shops and the remainder to Industrial Providers.

GC has asked its sales force to track the amount of time spent on selling cookies versus other baked goods. Analysis of this data indicates that the total Selling and Admin expenses allocated to cookies in total should increase from $11,850 to $39,000. This means net income reported as $51,900 is really $27,150 lower. Further analysis indicates that of the total time spent selling cookies, on 1% of that time was spent in Specialty Cookie Shops.

REQUIRED:

1. Identify at least two ways in which the two segments (Specialty Cookie Shops and Industrial Providers) differ from each other?

2. Using Activity Based Costing, restate the segmented income statement.

3. Based on your analysis, what changes would you recommend to GC?

Reference no: EM131692530

Questions Cloud

What do you think about yourself and your own character : important words for the existentialist philosophers. What do these two words mean to you in a personal way
Waterfall development-based methodology : Supposed you are a project manager using a waterfall development-based methodology on a large and complex project.
How does diversity affect the organizations work balance : How does diversity affect the organization's work/life balance and what ethical considerations exist that may drive organization to be more work/life balanced?
Calculate the number of units to be produced in june : Budgeted ending finished goods inventory for May is 3,150 units. Required - Calculate the number of units to be produced in June and July
Restate the segmented income statement : Identify at least two ways in which the two segments - Using Activity Based Costing, restate the segmented income statement and what changes would you recommend
How many kids do their schoolwork on line : According to an article in USA Today, 60% of 7- to 12-year-olds who use the Internet do their schoolwork on line.9 If 8 kids within this age group.
Identify the size and scope of the organization : Identify the size and scope of the organization. Construct a budget using Excel that will provide a breakdown of the various organizational budget items.
The position that you will be presenting at the conference : Statements are your preliminary position that you will be presenting at the conference
Variance of total cost of lunches bought on a particular day : The cafeteria in a building offers three different lunches. The demands for the three types of lunch on any given day are independent and Poisson distributed.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd