The management accountant for the Martino Organics has prepared the following segmented income statement for the most current year.
Produce Fish & Meat Sundries Total
Sales $80,000 $120,000 $60,000 $220,000
Variable expenses 36,000 65,000 20,000 121,000
Contribution margin 44,000 55,000 40,000 99,000
Other costs 18,000 21,000 8,000 47,000
Segment margin 26,000 34,000 32,000 52,000
Allocated avoidable costs 2,000 3,000 3,000 8,000
Segment income 24,000 31,000 29,000 44,000
Allocated corporate costs 7,000 7,000 7,000 21,000
Corporate profit $17,000 $24,000 $22,000 $23,000
35) If the Produce department had been eliminated prior to this year, the company would have reported:
A) greater corporate profits.
B) the same amount of corporate profits.
C) less corporate profits.
D) resulting profits cannot be determined.
36) If the Fish & Meat department (the Martino Organics Company) had been discontinued, the short-term effect on corporate profits would be a decrease of:
37) Assume that the Sundries department (the Martino Organics Company) has been discontinued and long-term capacity of the company has had time to adjust. The projected long-term effect of this action on annual corporate profits would be a decrease of:
38) Assume an advertising campaign (the Martino Organics Company) could increase revenues for any of the products by $15,000. To maximize corporate profits, the ________ department should receive the advertising dollars. Assume the cost of the advertising campaign is less than the revenues it generates.
B) FIsh & Meat
D) From the information given, the correct product line cannot be determined.
The Jordan Company manufacturers only one type of shoe and has two divisions, the Sole Division and the Assembly Division. The Sole Division manufactures soles and then "sells" them to the Assembly Division, which completes the shoes and sells them to retailers. The market price for the Assembly Division to purchase a pair of soles is $40. Fixed costs are per pair at 100,000 units.
Sole's costs per pair of soles are:
Direct materials $8
Direct labor $6
Variable overhead $4
Division fixed costs $2
Assembly's costs per completed pair of shoes are:
Direct materials $10
Direct labor $2
Variable overhead $2
Division fixed costs $18
39) If the cost-based transfer price is 180% of variable costs , what is the transfer price per pair of soles from the Sole Division to the Assembly Division?
40) Assume an organization's cost of capital is 10% and Division X has operating income of $3 million and uses $20 million of capital. The economic value added for Division X is: