5. Hayward Accounting Services has the following customer data: Sales revenue Variable costs Contribution margin Direct...
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5. Hayward Accounting Services has the following customer data: Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Angel $50,000 $40,000 $10,000 $ 3,000 $ 4.000 $3,000 Customers Blather $50,000 $37.000 $13,000 $ 4,000 $4.000 $ 5,000 Carpenter $25,000 $18,000 $ 7,000 $6,500 $ 2.000 ($1,500) Total $125,000 $95.000 $ 30,000 $ 13,500 $ 10.000 $ 6,500 Management is concerned about the losses associated with the Carpenter account and would like to drop this customer. Allocated fixed costs are assigned to customers based on sales revenue. If Carpenter is dropped, total allocated fixed costs are assigned to the remaining customers, and all variable and direct fixed costs for the Carpenter account will be eliminated. REQUIRED: Using an Excel spreadsheet, perform a differential analysis using the format presented in Figure 7.10 of your textbook. Assume keeping all customers is Alternative 1 and dropping the Carpenter account is Alternative 2. Which alternative is better? Explain. 5. Hayward Accounting Services has the following customer data: Sales revenue Variable costs Contribution margin Direct fixed costs Allocated fixed costs Profit (loss) Angel $50,000 $40,000 $10,000 $ 3,000 $ 4.000 $3,000 Customers Blather $50,000 $37.000 $13,000 $ 4,000 $4.000 $ 5,000 Carpenter $25,000 $18,000 $ 7,000 $6,500 $ 2.000 ($1,500) Total $125,000 $95.000 $ 30,000 $ 13,500 $ 10.000 $ 6,500 Management is concerned about the losses associated with the Carpenter account and would like to drop this customer. Allocated fixed costs are assigned to customers based on sales revenue. If Carpenter is dropped, total allocated fixed costs are assigned to the remaining customers, and all variable and direct fixed costs for the Carpenter account will be eliminated. REQUIRED: Using an Excel spreadsheet, perform a differential analysis using the format presented in Figure 7.10 of your textbook. Assume keeping all customers is Alternative 1 and dropping the Carpenter account is Alternative 2. Which alternative is better? Explain.
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Related Book For
Accounting Principles
ISBN: 978-1119048503
7th Canadian Edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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