1) A division of Kiray Company contributes $200,000 to overhead but has $500,000 in allocated overhead, $50,000 of which cannot be eliminated. The document asks if the division should be dropped.
2) Department 6 of Marinduque Corporation had $200,000 in net losses in July 2019. Sixty percent of its $800,000 in fixed costs were allocated from head office. The document asks to calculate its segment margin and recommend continuing or dropping Department 6.
3) Gata Company plans to discontinue a department contributing $48,000 to overhead with $96,000 in allocated overhead, $42,000 of which cannot be eliminated. The document asks what the
1) A division of Kiray Company contributes $200,000 to overhead but has $500,000 in allocated overhead, $50,000 of which cannot be eliminated. The document asks if the division should be dropped.
2) Department 6 of Marinduque Corporation had $200,000 in net losses in July 2019. Sixty percent of its $800,000 in fixed costs were allocated from head office. The document asks to calculate its segment margin and recommend continuing or dropping Department 6.
3) Gata Company plans to discontinue a department contributing $48,000 to overhead with $96,000 in allocated overhead, $42,000 of which cannot be eliminated. The document asks what the
1) A division of Kiray Company contributes $200,000 to overhead but has $500,000 in allocated overhead, $50,000 of which cannot be eliminated. The document asks if the division should be dropped.
2) Department 6 of Marinduque Corporation had $200,000 in net losses in July 2019. Sixty percent of its $800,000 in fixed costs were allocated from head office. The document asks to calculate its segment margin and recommend continuing or dropping Department 6.
3) Gata Company plans to discontinue a department contributing $48,000 to overhead with $96,000 in allocated overhead, $42,000 of which cannot be eliminated. The document asks what the
1) A division of Kiray Company contributes $200,000 to overhead but has $500,000 in allocated overhead, $50,000 of which cannot be eliminated. The document asks if the division should be dropped.
2) Department 6 of Marinduque Corporation had $200,000 in net losses in July 2019. Sixty percent of its $800,000 in fixed costs were allocated from head office. The document asks to calculate its segment margin and recommend continuing or dropping Department 6.
3) Gata Company plans to discontinue a department contributing $48,000 to overhead with $96,000 in allocated overhead, $42,000 of which cannot be eliminated. The document asks what the
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 1
Drop or Continue a Department/Product
1. Kiray Company plans to discontinue a division with a P200,000 contribution to overhead.
Overhead allocated to the division if P500,000, of which P50,000 cannot be eliminated. Should Kiray Company drop the division.
2. The income statement of Marinduque Corporation;s Department 6 for July 2019 is shown below:
Marinduque Corporation Income Statement – Department 4 For the month ended July 31,2019 Sales 2,400,000 Less: Variable costs and expenses 1,800,000 Contribution margin 600,000 Less: Fixed costs and expenses 800,000 Net income (200,000)
Sixty percent of the total fixed costs and expenses are allocated from the heal office. The company’s president is contemplating to drop Department 6 on account of its unfavorable performance. The discontinuance of Department 6 would not affect sales of other departments.
Required: a. Compute the segment margin of Department 6 in July 2019. b. Would you recommend to continue or to drop Department 6?
3. Gata Company plans to discontinue a department with P48,000 contribution to overhead,
and allocated overhead of P96,000 of which P42,000 cannot be eliminated. What would be the effect of this discontinuance on Gata’s pretax profit?
4. Cathy Corporation produces three products, “Tic”, “Tac” and “Toe”. The owner desires to reduce production load to only one product line due to prolonged absence of the production manager. Depreciation expense amounts to P600,000 annually. Other fixed operating expenses amount to P660,000 per year. The sales and variable cost data of the three products are as follows:
