1. Using the data from the Coffee & Cocoa Company,
(a) determine the divisional income from operations for the THREE regions by allocating the service department expenses proportional to the sales of the regions
(b) determine the increase or decrease in net income if C Region did not operate.
A Region - B Region - C Region
Sales $600,000 - $900,000 - $300,000
Cost of goods sold $200,000 - $350,000 - $190,000
Selling Expenses $150,000 - $275,000 - $100,000
Service Department expenses
Purchasing - - $120,000
Payroll accounting - - $80,000
2.The sales, income from operations, and invested assets for each division of Wren Co. are as follows:
Income from - Invested assets
Sales - operations - assets
Division C $5,000,000 $630,000 $4,000,000
Division D 6,800,000 760,000 3,900,000
Division E 3,750,000 750,000 7,500,000
Management has established a minimum rate of return for invested assets of 10%
(a) Determine the residual income for each division.
(b) Based on residual income, which of the divisions is the most profitable
3. Product J is one of the many products manufactured and sold by oCEANSIDE cOMPANY. aN INCOME STATEMENT BY PRODUCT LINE FOR THE PAST Year indicated a net loss for product J of $12,250. This net loss resulted from sales of $260,000, costs of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if product J is discontinued.