Harold Manufacturing produces denim clothing. This year, it produced 5,100 denim jackets at a manufacturing cost...

  

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Harold Manufacturing produces denim clothing. This year, it produced 5,100 denim jackets at a manufacturing cost of $42.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $32,900 and sold to a recycler for $12.00 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,100 jackets into only 3,020 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,600, but the jackets can then be sold for their regular price of $45.00 each. Required: 1. Calculate the incremental income. Incremental revenue Incremental costs Incremental income Alternative 1 Sell to a secondhand shop 0 Alternative 2 Disassemble and sell to a recycler 0 Alternative 3 Rework and sell at regular prices 0 Calla Company produces skateboards that sell for $65 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 80,400 skateboards per year. Annual costs for 80,400 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses. A new retail store has offered to buy 9,600 of its skateboards for $60 per unit. The store is in a different market from Calla's regular customers and would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following: Direct materials and direct labor are 100% variable. 50 percent of overhead is fixed at any production level from 80,400 units to 90,000 units; the remaining 50% of annual overhead costs are variable with respect to volume. $ 860,280 643,200 958,000 549,000 470,000 $3,480,480 Selling expenses are 70% variable with respect to number of units sold, and the other 30% of selling expenses are fixed. There will be an additional $1.50 per unit selling expense for this order. • Administrative expenses would increase by a $900 fixed amount. Required: 1. Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. 2. Should Calla accept this order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. (Do not round your intermediate calculations. Round your cost and expenses to nearest whole number.) Costs and expenses: Total costs and expenses Operating income CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume 0 Additional Volume 0 Combined Total 0 Show less A Required information [The following information applies to the questions displayed below.] Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. Sales Cost of goods sold Gross profit Operating expenses Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses Allocated expenses Sales salaries. Rent expense Bad debts expense office salary. Insurance expense Miscellaneous office expenses. Total allocated expenses Total expenses Net income (loss) ELEGANT DECOR COMPANY Departmental Income Statements. For Year Ended December 31, 2019 Dept. 100 Advertising Direct expenses Bad debts expense Allocated expenses Total expenses Dept. 200 $443,000 $287,000 210,000 77,000 270,000 173,000 Total Expenses 17,000 6,000 4,000 27,000 ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 $ 78,000 9,460 9,700 18,720 1,700 2,200 0 $ 119,780 146,780 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $600 per week, or $31,200 per year, and four salesclerks who each earns $600 per week, or $31,200 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 71% of the insurance expense allocated to it to cover its merchandise inventory; and 22% of the miscellaneous office expenses presently allocated to it. 13,500 5,400 2,600 21,500 Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. 46,800 4,790 7,700 12,480 1,000 1,600 74,370 95,870 242,650 $ 26,220 $(18,870) $ 7,350 Combined $730,000 480,000 250,000 Eliminated Continuing Expenses Expenses 0 $ 30,500 11,400 6,600 48,500 124,800 14,250 17,400 31,200 2,700 3,800 194, 150 0 Harold Manufacturing produces denim clothing. This year, it produced 5,100 denim jackets at a manufacturing cost of $42.00 each. These jackets were damaged in the warehouse during storage. Management investigated the matter and identified three alternatives for these jackets. 1. Jackets can be sold as is to a secondhand clothing shop for $8.00 each. 2. Jackets can be disassembled at a cost of $32,900 and sold to a recycler for $12.00 each. 3. Jackets can be reworked and turned into good jackets. However, with the damage, management estimates it will be able to assemble the good parts of the 5,100 jackets into only 3,020 jackets. The remaining pieces of fabric will be discarded. The cost of reworking the jackets will be $101,600, but the jackets can then be sold for their regular price of $45.00 each. Required: 1. Calculate the incremental income. Incremental revenue Incremental costs Incremental income Alternative 1 Sell to a secondhand shop 0 Alternative 2 Disassemble and sell to a recycler 0 Alternative 3 Rework and sell at regular prices 0 Calla Company produces skateboards that sell for $65 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 80,400 skateboards per year. Annual costs for 80,400 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses. A new retail store has offered to buy 9,600 of its skateboards for $60 per unit. The store is in a different market from Calla's regular customers and would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following: Direct materials and direct labor are 100% variable. 50 percent of overhead is fixed at any production level from 80,400 units to 90,000 units; the remaining 50% of annual overhead costs are variable with respect to volume. $ 860,280 643,200 958,000 549,000 470,000 $3,480,480 Selling expenses are 70% variable with respect to number of units sold, and the other 30% of selling expenses are fixed. There will be an additional $1.50 per unit selling expense for this order. • Administrative expenses would increase by a $900 fixed amount. Required: 1. Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. 2. Should Calla accept this order? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. (Do not round your intermediate calculations. Round your cost and expenses to nearest whole number.) Costs and expenses: Total costs and expenses Operating income CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume 0 Additional Volume 0 Combined Total 0 Show less A Required information [The following information applies to the questions displayed below.] Elegant Decor Company's management is trying to decide whether to eliminate Department 200, which has produced losses or low profits for several years. The company's departmental income statements show the following. Sales Cost of goods sold Gross profit Operating expenses Direct expenses Advertising Store supplies used Depreciation-Store equipment Total direct expenses Allocated expenses Sales salaries. Rent expense Bad debts expense office salary. Insurance expense Miscellaneous office expenses. Total allocated expenses Total expenses Net income (loss) ELEGANT DECOR COMPANY Departmental Income Statements. For Year Ended December 31, 2019 Dept. 100 Advertising Direct expenses Bad debts expense Allocated expenses Total expenses Dept. 200 $443,000 $287,000 210,000 77,000 270,000 173,000 Total Expenses 17,000 6,000 4,000 27,000 ELEGANT DECOR COMPANY Analysis of Expenses under Elimination of Department 200 $ 78,000 9,460 9,700 18,720 1,700 2,200 0 $ 119,780 146,780 In analyzing whether to eliminate Department 200, management considers the following: a. The company has one office worker who earns $600 per week, or $31,200 per year, and four salesclerks who each earns $600 per week, or $31,200 per year for each salesclerk. b. The full salaries of two salesclerks are charged to Department 100. The full salary of one salesclerk is charged to Department 200. The salary of the fourth clerk, who works half-time in both departments, is divided evenly between the two departments. c. Eliminating Department 200 would avoid the sales salaries and the office salary currently allocated to it. However, management prefers another plan. Two salesclerks have indicated that they will be quitting soon. Management believes that their work can be done by the other two clerks if the one office worker works in sales half-time. Eliminating Department 200 will allow this shift of duties. If this change is implemented, half the office worker's salary would be reported as sales salaries and half would be reported as office salary. d. The store building is rented under a long-term lease that cannot be changed. Therefore, Department 100 will use the space and equipment currently used by Department 200. e. Closing Department 200 will eliminate its expenses for advertising, bad debts, and store supplies; 71% of the insurance expense allocated to it to cover its merchandise inventory; and 22% of the miscellaneous office expenses presently allocated to it. 13,500 5,400 2,600 21,500 Required: 1. Complete the following report showing total expenses, expenses that would be eliminated by closing Department 200 and the expenses that would continue. The statement should reflect the reassignment of the office worker to one-half time as salesclerk. 46,800 4,790 7,700 12,480 1,000 1,600 74,370 95,870 242,650 $ 26,220 $(18,870) $ 7,350 Combined $730,000 480,000 250,000 Eliminated Continuing Expenses Expenses 0 $ 30,500 11,400 6,600 48,500 124,800 14,250 17,400 31,200 2,700 3,800 194, 150 0

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Here is the analysis of expenses under the elimination of Department 200 ELEGANT DECOR COMPANY Analy... View the full answer