Problem Set B

PROBLEM $22\mathrm{.}1$B Preparing and Using Responsibility Income Statements LO$22-3,$ sqrt$()$ LO$22-4,$ sqrt$()$ LO$22-5$

Beverley Products has two divisions$-$Residential Products and Commercial Products. Cost and revenue data for each division for the current month are as follows:

In addition, fixed costs that are common to both divisions amount to $$60,000.$

Instructions

a$.$ Prepare the company's responsibility income statement for the current month. Report the responsibility margin for each division and income from operations for the

company as a whole. Also include columns showing all dollar amounts as percents of sales $($round all percent figures to whole percents$).$

b$.$ According to the analysis performed in part a$,$ which division is most profitable in terms of dollars of responsibility margin that it contributes to the company? Should

the common fixed costs be considered when determining the profitability of the two divisions individually? Why or why not?

c$.$ The company has $$14,000$ to be used in advertising for one of its two divisions and expects that this expenditure will result in additional sales of $$40,000.$ Based upon

each division's contribution margin ratio, how should the company decide which division to advertise?

Problem Set B

PROBLEM $22\mathrm{.}1$B Preparing and Using Responsibility Income Statements LO$22-3,\backslash (\backslash$sqrt$\{\}\backslash )$ LO$22-4,\backslash (\backslash$sqrt$\{\}\backslash )$ LO$22-5$

Beverley Products has two divisions$-$Residential Products and Commercial Products. Cost and revenue data for each division for the current month are as follows:

In addition, fixed costs that are common to both divisions amount to $\backslash (\backslash$$ $60,000\backslash ).$

Instructions

a$.$ Prepare the company's responsibility income statement for the current month. Report the responsibility margin for each division and income from operations for the company as a whole. Also include columns showing all dollar amounts as percents of sales $($round all percent figures to whole percents$).$

b$.$ According to the analysis performed in part a$,$ which division is most profitable in terms of dollars of responsibility margin that it contributes to the company? Should the common fixed costs be considered when determining the profitability of the two divisions individually? Why or why not?

c$.$ The company has $\backslash (\backslash$$ $14,000\backslash )$ to be used in advertising for one of its two divisions and expects that this expenditure will result in additional sales of $\backslash (\backslash$$ $40,000\backslash ).$ Based upon each division's contribution margin ratio, how should the company decide which division to advertise?