Make It Play is a manufacturer that specializes in three types of toy instruments: xylophones, electronic keyboards,
Question:
Make It Play is a manufacturer that specializes in three types of toy instruments: xylophones, electronic keyboards, and drum sets. Grandparents across the globe flock to stores so they can buy their kids’ kids these especially noisy toys. Company managers are equally excited about their products and await the profit report for this year’s performance. The following partial income statement was released to all managers last week.
Xylophone | Keyboard | Drums | Total | |||||
---|---|---|---|---|---|---|---|---|
Sales | $500,000 | $900,000 | $600,000 | $2,000,000 | ||||
Cost of goods sold | 215,000 | 440,000 | 350,000 | 1,005,000 | ||||
Gross margin | 285,000 | 460,000 | 250,000 | 995,000 | ||||
Operating expenses | 800,000 | |||||||
Operating income | $ 195,000 |
Required
The company has not previously allocated its operating expenses to the three product lines but wants to do so now. Managers believe operating expenses are incurred in a proportion similar to COGS for each product line. Allocate the operating expenses using each product line’s proportion of its own COGS to total COGS, then determine operating income and profit margin percentage by product line.
OM operations management
ISBN: 978-1285451374
5th edition
Authors: David Alan Collier, James R. Evans