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Hello can you please assist with the attached document, I tried working
out the problem keep getting the wrong solution. If possible can you please show steps so I can follow?
thank you
value:
10.00 points
McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new
policy that if a product cannot earn a margin on sales of at least 30 percent, it will be dropped. The
margin is computed as product gross profit divided by reported product cost.
Manufacturing overhead for year 1 totaled $915,000. Overhead is allocated to products based on
direct labor cost. Data for year 1 show the following:
Chairs
Desks
Sales revenue $1,220,000 $2,862,000
Direct
materials
601,000
970,000
Direct labor
150,000
460,000
Required:
a-1.
Based on the CFO's new policy, calculate the profit margin for both chairs and desks.
Profit Margin
Chairs
???
%
Desks
???
%
a-2.
Which of the two products should be dropped?
Chairs
Desks
b.
Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop
the chair product. The company cost analyst estimates that overhead without the chair line will be
$820,000. The revenue and costs for desks are expected to be the same as last year. What is the
estimated margin for desks in year 2?
(Do not round intermediate calculations. Enter your
answer as a percentage rounded to 1 decimal place.)
Estimated margin desks-Year 2
???
%
3 pages
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