tribution format income statement for the most recent year for Big Bear Consumer Electronics Inc. is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
tribution format income statement for the most recent year for Big Bear Consumer Electronics Inc. is shown below. Sales Les variable expenses Contribution Margin Less Traceable Fixed Expenses Segment Margin Les Common Fixed Expenses Net Operating Income Total Department $320,000 100% 236.000 84,000 26% 15.000 5% 69,000 222 40.000 135 $29.000 AM/FM radios HD radion $270,000 100% $50,000 100% 216,000 80% 20,000 40%% $4,000 20% 30,000 10,000 5.000 $44,000 16% $25.000 PROBLEM BACKGROUND: Shortly after graduating with a business degree from are hired as an assistant to the District Manager of a 4% 60% 10% During your first day on the job you attend a meeting regarding product lines carried by the chain. You learn about a fairly new innovation called ID (high definition) radio This product allows consumers to listen to not only traditional AM and FM bands, but also to the newly created HD frequencies that most local radio stations are broadcasting free of charge to listeners on adjacent frequencies that previously were unused. Unlike satellite radio, this service requires no subscription charges. Consumers who have heard HD radio tell you that AM-HD broadcasts sound like FM and FM-HD broadcasts wound like CD quality! Due to improved manufacturing technologies, the cost to manufacture HD radio bas dropped dramatically. PROBLEM: Your boss (the District Manager) has authorized you to spend $10,000 for advertising for one of your chain's local stores, promoting one of their product lines A Marketing Research class at Bridgewater State University conducted a study indicating that the additional advertising would increase sales of the AM/FM radios by $50,000 and increase sales of the HD radios by only $45,000. The local store manager (who never took a course in Managerial Accounting) argues that the advertising budget should be spent on the AM/FM radios because it will result in more sales dollars. The store manager also argues that the AM/FM radio line's total sales are substantially higher than the HD line, therefore as the biggest selling inem, it should receive all advertising allotments REQUIRED: YOU ARE TO WORK INDEPENDENTLY a) Using Excel, prepare new segmented income statements (including the new sales and cost data) based upon your recommendation, thint: on what line would the $10,000 of dedicated advertising appear?) You should submit 3 segmented income statements. The first being the original data on front of this page, the second, assuming the advertising is spent on AM/FM and the third assuming the advertising is spent on HD radios b) Determine which product line (AM/FM radios or HD radios) you will spend the $10,000 of advertising on Show your work, justifying this decision, based upon a cost benefit analysis. What would you tell the store manager? Inclode a short memo to your boss (the District Manager) explaining your decision. d) Are there any "implicit considerations that should enter the decision on which product line to promote? c) What form of media would you recommend using to advertise your chosen product line? (explain why) tribution format income statement for the most recent year for Big Bear Consumer Electronics Inc. is shown below. Sales Les variable expenses Contribution Margin Less Traceable Fixed Expenses Segment Margin Les Common Fixed Expenses Net Operating Income Total Department $320,000 100% 236.000 84,000 26% 15.000 5% 69,000 222 40.000 135 $29.000 AM/FM radios HD radion $270,000 100% $50,000 100% 216,000 80% 20,000 40%% $4,000 20% 30,000 10,000 5.000 $44,000 16% $25.000 PROBLEM BACKGROUND: Shortly after graduating with a business degree from are hired as an assistant to the District Manager of a 4% 60% 10% During your first day on the job you attend a meeting regarding product lines carried by the chain. You learn about a fairly new innovation called ID (high definition) radio This product allows consumers to listen to not only traditional AM and FM bands, but also to the newly created HD frequencies that most local radio stations are broadcasting free of charge to listeners on adjacent frequencies that previously were unused. Unlike satellite radio, this service requires no subscription charges. Consumers who have heard HD radio tell you that AM-HD broadcasts sound like FM and FM-HD broadcasts wound like CD quality! Due to improved manufacturing technologies, the cost to manufacture HD radio bas dropped dramatically. PROBLEM: Your boss (the District Manager) has authorized you to spend $10,000 for advertising for one of your chain's local stores, promoting one of their product lines A Marketing Research class at Bridgewater State University conducted a study indicating that the additional advertising would increase sales of the AM/FM radios by $50,000 and increase sales of the HD radios by only $45,000. The local store manager (who never took a course in Managerial Accounting) argues that the advertising budget should be spent on the AM/FM radios because it will result in more sales dollars. The store manager also argues that the AM/FM radio line's total sales are substantially higher than the HD line, therefore as the biggest selling inem, it should receive all advertising allotments REQUIRED: YOU ARE TO WORK INDEPENDENTLY a) Using Excel, prepare new segmented income statements (including the new sales and cost data) based upon your recommendation, thint: on what line would the $10,000 of dedicated advertising appear?) You should submit 3 segmented income statements. The first being the original data on front of this page, the second, assuming the advertising is spent on AM/FM and the third assuming the advertising is spent on HD radios b) Determine which product line (AM/FM radios or HD radios) you will spend the $10,000 of advertising on Show your work, justifying this decision, based upon a cost benefit analysis. What would you tell the store manager? Inclode a short memo to your boss (the District Manager) explaining your decision. d) Are there any "implicit considerations that should enter the decision on which product line to promote? c) What form of media would you recommend using to advertise your chosen product line? (explain why)
Expert Answer:
Answer rating: 100% (QA)
Sales Less Variable Expense Contribution Margin Less Traceable Fixed Expense Segment Margin Less Com... View the full answer
Related Book For
Managerial Accounting
ISBN: 9781260247787
17th Edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these accounting questions
-
For the most recent year available, the mean annual cost to attend a private university in the United States was $20,332. Assume the distribution of annual costs follows the normal probability...
-
For PepsiCo for the most recent year explain the difference between net income and the change in cash and equivalents. In other words, why is the profit or loss of PepsiCo different from the change...
-
Whirly Corporation's contribution format income statement for the most recent month is shown below: Required: (Consider each case independently): 1. What would be the revised net operating income per...
-
You want to short a 6-month forward contract on a stock. You contacted your bank and were offered a forward price of $39.85 [Note: This forward price is available only to customers who want to take a...
-
What is the purpose of stating the primary actor for the use case?
-
What are prime costs? Conversion costs?
-
The following transactions occurred between Kinzer Furniture and M & L Furniture Warehouse during May of the current year: Requirements 1. Journalize these transactions on the books of Kinzer...
-
Air at a flow rate of 12,000 scfm (60?F, 1 atm) and containing 0.5 mol% ethyl acetate (EA) and no water vapor is to be treated with activated carbon (C) (?b = 30 lb/ft3) with an equivalent particle...
-
The after-tax costs for each source will be as follows: 8% for debt, 10.5% for preferred equity, and 12.75% for common equity. Calculate the WACC in another spreadsheet within your Excel worksheet....
-
The International Lodging Merger Role of AAA Hotels Executive Committee, discuss the major negotiation point between the two hotels and how to gain a result from the AAA Hotels point of view. How to...
-
According to Hill and Hult ( 2 0 1 8 ) , socialism was influenced by the works of Karl Marx and what other writer?
-
How can smoking exert a positive externality on others?
-
Identify the four steps of the KEYS process.
-
Comment on the free rider problem in the context of global climate agreements. How does recent historical experience with the Kyoto Treaty and the Paris Agreement relate to this problem?
-
Americans are split on the subject of school vouchers, and the controversy especially affects communities with disproportionate numbers of poor families. Some leaders in these communities strongly...
-
U.S. law prohibits hospitals from denying patients care in an emergency, even if they are unable to pay. Historically, the cost of covering these uninsured patients has been passed on to insured...
-
You're trying to save to buy a new $200,000 Ferrari. You have $39,000 today that can be invested at your bank. The bank pays 4.0 percent annual interest on its accounts. How long will it be before...
-
Suppose the S&P 500 futures price is 1000, = 30%, r = 5%, = 5%, T = 1, and n = 3. a. What are the prices of European calls and puts for K = $1000? Why do you find the prices to be equal? b. What...
-
In what ways are job-order and process costing similar?
-
Refer to the financial statements and other data in Problem 16-18. Assume Paul Sabin has asked you to assess his companys profitability and stock market performance. Required: 1. You decide first to...
-
Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $15 per hour. During the...
-
The partnership of King. Queen, \&- Page has experienced operating losses for three consecutive years. The partners-who have shared profits and losses in the ratio of King, \(15 \%\) : Queen, \(60...
-
ABACUS is a partnership owned by Allen, Bacon, and Cush, who share profits and losses in the ratio of \(1: 3: 4\). The account balances of the partnership at June 30 follow. Requirements 1. Prepare...
-
On June 30, Allie Hayes and Mandy McKay formed a partnership. The women agree to invest equal amounts of capital. Hayes invests her proprietorship's assets and liabilities (credit balances in...
Study smarter with the SolutionInn App