Gail Johnston is the CFO of Lancet Technologies, a manufacturer of parts and supplies for the...
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Gail Johnston is the CFO of Lancet Technologies, a manufacturer of parts and supplies for the cable TV industry. Gail has developed an analysis of the profitability of the firm's two main product lines, cable hardware, and cable supplies. Based on the analysis, she concludes that cable hardware is the most profitable of the firm's product lines. Sales Cost of goods sold Gross profit Research and development Selling expenses Profit before taxes Essay Hardware $ 4,000,000 (2,300,000) $ 1,700,000 Tocibar navigation Supplies $ 3,000,000 (1,900,000) $1,100,000 Required: 1. Explain why Gail may be wrong in her assessment of the relative performances of the two product lines. 2. Suppose that 80 percent of the R & D and selling expenses are traceable to Hardware line. Prepare life-cycle income statements for each product and calculate the return on sales. What does this tell you about the importance of accurate life-cycle costing? www Total $7,000,000 (4,200,000) 2,800,000 (1,200,000) (600,000) $ 1,000,000 Next Gail Johnston is the CFO of Lancet Technologies, a manufacturer of parts and supplies for the cable TV industry. Gail has developed an analysis of the profitability of the firm's two main product lines, cable hardware, and cable supplies. Based on the analysis, she concludes that cable hardware is the most profitable of the firm's product lines. Sales Cost of goods sold Gross profit Research and development Selling expenses Profit before taxes Essay Hardware $ 4,000,000 (2,300,000) $ 1,700,000 Tocibar navigation Supplies $ 3,000,000 (1,900,000) $1,100,000 Required: 1. Explain why Gail may be wrong in her assessment of the relative performances of the two product lines. 2. Suppose that 80 percent of the R & D and selling expenses are traceable to Hardware line. Prepare life-cycle income statements for each product and calculate the return on sales. What does this tell you about the importance of accurate life-cycle costing? www Total $7,000,000 (4,200,000) 2,800,000 (1,200,000) (600,000) $ 1,000,000 Next
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Answer rating: 100% (QA)
1 LIFECYCLE INCOME STATEMENTS Particular Hardware Supplies Total Sales 4000000 3000000 7000000 Cost ... View the full answer
Related Book For
Forensic Accounting and Fraud Examination
ISBN: 978-0078136665
2nd edition
Authors: William Hopwood, george young, Jay Leiner
Posted Date:
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