1.) Identify the costs Below as variable, fixed, or mixed.

1. Wood used in the production of furniture.

2. Fuel used in delivery trucks.

3. Straight-line depreciation on factory building.

4. Screws used in the production of furniture.

5. Sales staff salaries.

6. Sales commissions.

7. Property taxes.

8. Insurance on buildings.

9. Hourly wages of furniture craftsmen.

10. Salaries of factory supervisors.

11. Utilities expense.

12. Telephone bill.

2.) Thompson Industrial Products Inc. (TIPI) is a diversified industrial-cleaner processing company. The company's Dargan plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week, 900,000 ounces of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor cleaner and 300,000 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name Floor Shine. The additional processing costs for this conversion amount to $240,000. Floor Shine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $17 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 300,000 ounces of another compound (TCP) to the 300,000 ounces of table cleaner. This joint process will yield 300,000 ounces each of table stain remover(TSR) and table polish (TP). The additional processing costs for this process amount to $100,000. Both table products can be sold for $14 per 25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on the following analysis.

Process Further

Table Cleaner Table stain remover(TSR) Table Polish (TP) Total

Production in ounces 300,000 300,000 300,000

Revenues $204,000 $168,000 $168,000 $336,000

COSTS:

CDG costs 70,000* 52,500 52,500 105,000*

TCP costs 0 50,000 50,000 100,000

Total costs 70,000 102,500 102,500 205,000

Weekly gross profit $134,000 $65,500 $65,000 $131,000

*If table cleaner is not processed further, it is allocated 1/3 of the $210,000 of CDG cost, which is equal to 1/3 of the total physical output. **If table cleaner is processed further, total physical output is 1,200,000 ounces. TSR and TP combined account for 50% of the total physical output and are each allocated 25% of the CDG cost.

Instructions

(a) Determine if management made the correct decision to not process the table cleaner further by doing the following. (1) Calculate the company's total weekly gross profit assuming the table cleaner is not processed further. (2) Calculate the company's total weekly gross profit assuming the table cleaner is processed further. (3) Compare the resulting net incomes and comment on management's decision.

(b) Using incremental analysis, determine if the table cleaner should be processed further. (CMA adapted)

3.) Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $213,000 and the following divisional results.

DIVISION I II III IV

Sales $250,000 $200,000 $500,000 $450,000

Cost of goods sold 200,000 192,000 300,000 250,000

Selling and administrative expenses 75,000 60,000 60,000 50,000

Income (loss) from operations $(25,000) $(52,000) $140,000 $150,000

Analysis reveals the following percentages of variable costs in each division.

I II III IV

Cost of goods sold 70% 90% 80% 75%

Selling and administrative expenses 40 60 50 60

Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

(a) Compute the contribution margin for Divisions I and II. (I $80,000)

(b) make an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division?

(c) make a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. (Use the CVP format.) Division II's unavoidable fixed costs

are allocated equally to the continuing divisions. (Income III $132,800)

(d) Reconcile the total income from operations ($213,000) with the total income from

operations without Division II.