Will new allocation method change your decision

Assignment Help Accounting Basics

Reference no: EM132985872

Question: Sheridan Equipment sells equipment to sports enthusiasts. Doug Sheridan, the company's president, just received the following income statement reporting the results of the past year.

                                             Baseball                Soccer               Basketball            Total
Sales revenue                               $1,310,000            $3,750,000          $2,465,000       $7,525,000
Variable cost of goods sold 884,000    2,437,000           1,985,600        5,307,100
Fixed cost of goods sold                119,300                   194,700             171,500            485,500
Gross profit                                 306,700                    1,117,800          307,900            1,732,400
Variable operating expenses         176,800                    600,000              246,500            1,023,300
Fixed operating expenses             82,200    87,500                75,900             245,600
Common fixed costs 62,500                     134,000    100,900    297,400
Operating income                        ($14,800)                 $296,300             ($115,400)       $166,100

Doug is concerned that two of the company's divisions are showing a loss, and he wonders if the company should stop selling baseball and basketball gear to concentrate solely on soccer gear.

Sumbit a segment margin income statement. Fixed cost of goods sold and fixed operating expenses can be traced to each division. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

Should Doug close the baseball and basketball divisions?

Doug wants to change the allocation method used to allocate common fixed costs to the divisions. His plan is to allocate these costs based on sales revenue. Will this new allocation method change your decision on whether to close the baseball and basketball divisions?

Reference no: EM132985872

Questions Cloud

Describe types of infrastructure that secure bank require : Secure Bank (SB) is a fictitious small-sized regional bank with 25,000 customers. It provides a full range of banking products, including Home loans, savings ac

What is the return on investment for a wine grape vineyard : What is the return on investment (ROI) for a wine grape vineyard with costs and returns? $2,000,000 Establishment costs (total for 3 years to bring vineyard)

Compute gross profit earned by the company : Compute gross profit earned by the company for each of the four costing methods. (Round your average cost per unit to 2 decimal places and final answers

Describe what steps you would take to prepare for interview : Assume that you are interviewing for a position as a management trainee in a large corporation. Also assume that this position pays $45,000 a year.

Will new allocation method change your decision : Doug wants to change the allocation method used to allocate common fixed costs to the divisions. His plan is to allocate these costs based on sales revenue

What can siraje do to improve presentation : A) John was asking Wang Jie to join his party at 10pm but Wang Jie refused because his parents set the curfew at 10.30pm. Using Deardoff's (2006) elements of in

Should replace hand picking with the mechanical harvester : Should you replace the hand picking with the mechanical harvester? Use a partial budget model to answer this question, and show your work.

Propose an economically viable factory : Ghana National Gas Company Limited (Ghana Gas) has a policy to set aside a revolving fund of one million United State dollars ($1,000,000) to invest in a commun

How do know if findings are good or bad : Let's say that you have calculated the ROA. How do you determine what that specific number means? How do you know if your findings are good or bad?

User Account

All Pages