ch12-AFM102s2012

The o theexpenses equipment would be written off the

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Unformatted text preview: be written off. The 140,000 Total fixed 400,000 depreciation that would have been (100,000) flow taken will flow depreciation that Net operating loss would have been taken will $ (140,000) $ tthrough the income statement as a loss instead. hrough the income statement as a loss instead. Managerial Accounting Difference $ (500,000) 120,000 5,000 75,000 200,000 (300,000) 90,000 100,000 70,000 260,000 $ (40,000) Adding/Dropping Segments 12-12 Comparative Income Approach Comparative Income Approach Solution Keep Drop Digital Digital W atches W atches Sales $ 500,000 $ Less variable expenses: Manufacturing expenses 120,000 Shipping 5,000 Commissions 75,000 Total variable expenses 200,000 Contribution margin 300,000 Less fixed expenses: General factory overhead 60,000 60,000 Salary of line manager 90,000 Depreciation 50,000 50,000 Advertising - direct 100,000 Rent - factory space 70,000 General admin. expenses 30,000 30,000 Total fixed expenses 400,000 140,000 Net operating loss $ (100,000) $ (140,000) Managerial Accounting Difference $ (500,000) 120,000 5,000 75,000 200,000 (300,000) 90,000 100,000 70,000 260,000 $ (40,000) 12-13 Adding/Dropping Segments Beware of Allocated Fixed Costs Why should we Why keep the digital watch segment when it’s showing a $100,000 loss? $100,000 loss Managerial Accounting The answ...
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This test prep was uploaded on 04/09/2014 for the course AFM 102 at Waterloo.

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