Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch Revenues Variable costs Fixed costs allocated to products Operating profit (loss) $ 383,600 237,600 153,230 $ (7,230) 44 Inch $ 587,000 54 Inch $ 364,800 291,680 231,464 169,500 144,806 $ 63,856 $ 50,494 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop Status Quo Difference 36-Inch Fan Revenue Less variable costs Contribution margin Less fixed costs Operating profit Lamothe Kitchen and Bath makes products for the home, which it sells through major retailers and remodeling (do-it-yourself, or DIY) outlets. One product that has had varying success is a ceiling fan for the kitchen. The fan comes in three sizes (36-Inch, 44-Inch, and 54-Inch), which are designed for various kitchen sizes and cooling requirements. The chief financial officer (CFO) at Lamothe has been looking at the segmented income statement for the fan and is concerned about the results for the 36-inch model. 36 Inch Revenues Variable costs Fixed costs allocated to products Operating profit (loss) $ 383,600 237,600 153,230 $ (7,230) 44 Inch $ 587,000 54 Inch $ 364,800 291,680 231,464 169,500 144,806 $ 63,856 $ 50,494 If the 36-Inch model is dropped, the revenue associated with it would be lost and the related variable costs saved. In addition, the company's total fixed costs would be reduced by 25 percent. Required: a. Prepare a differential cost schedule to support your recommendation. b. Should Lamothe Kitchen and Bath should drop the 36-Inch model product line? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a differential cost schedule to support your recommendation. (Select option "increase" or "decrease", keeping Status Quo as the base. Select "none" if there is no effect.) Alternative: Drop Status Quo Difference 36-Inch Fan Revenue Less variable costs Contribution margin Less fixed costs Operating profit
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Why does the following code fragment not have the same effect as the code fragment in the previous question? x.next t.next = t; = x.next;
-
Why might a deferred tax liability be considered not a liability for credit scoring?
-
Suppose that S is a smooth surface. a) Show that there exist smooth parametrizations (j, Ej) of portions of S such that S = UNj=1 j(Ej). b) Show that there exist nonoverlapping surfaces Sj with...
-
The 2014 financial statements of LVMH Moet Hennessey-Louis Vuitton S.A. are presented in Appendix C of this book. LVMH is a Paris-based holding company and one of the worlds largest and best-known...
-
The following information was available about items that differed between the governmental funds and the government-wide statements. Assume that there are no internal service funds. The schedule of...
-
what makes the audit readiness requirements for military equipment unique
-
38. Chief Henry Batter of the Gotham City Police Department is trying to reduce the time required to answer the phone at police headquarters (in fractions of a minute). The data are provided in the...
-
Suppose that the 2-year interest rates with continuous compounding in Australia and the United States are 1.6% and 2.2% per annum, respectively, and the spot exchange rate between the Australian...
-
A company produces 3 products with the following budget information available: ABC Sales GH14GH15GH18 Standard full costGH10GH10GH13 Budget Production10,000 units13,000 units9,000 units The actual...
-
NO. 8 Moana Company, produces a product called Lilo. The company buys materials needed to make a Lilo from different suppliers in Cotabato at P1.50 each. To convert the materials into Lilo, the same...
-
1. Prepare condensed divisional income statements for the year ended December 31, 2017, assuming that there were no service departmen cost allocations. Free Ride Bike Company Divisional Income...
-
Paynesville Corporation manufactures and sells a preservative used in food and drug manufacturing. The company carries no inventories. The master budget calls for the company to manufacture and sell...
-
The Rowe Family Trust and A1 Mechanical Pty Ltd formed a partnership to operate a wholesale business selling motor vehicle parts, called A1 Parts Australia. The Partnership is 50/50 and all...
-
Using the information presented in Problem 13.4B, prepare a partial statement of cash flows for the current year, showing the computation of net cash flows from operating activities using the...
-
The Arcadia Company bid on a multiyear contract to construct the new hockey arena for the Phoenix Coyotes. The contract required that construction begin not later than January 1, 2015, and be...
-
Forms are provided in the Working Papers. Your instructor will guide you through the following examples. 1. Create a schedule that shows the payment of an annuity over a four-year period. The initial...
-
The Hilton Company sells inexpensive furniture on installment plans to customers that have poor credit. Many of the companys customers are sometimes not able to make the required payments, forcing...
Study smarter with the SolutionInn App