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E22-21 Love My Phone is based in Kingswood, Texas. The merchandising company has two

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E22-21 Preparing performance reports for responsibility centers [15–20 min]

Love My Phone is based in Kingswood, Texas. The merchandising company has two
divisions: Cell Phones and MP3 Players. The Cell Phone division has two main product
lines: Basic and Advanced.

The Basic product line includes phones whose primary
function is storing contacts and making/receiving calls. The Advanced product
line includes multi-application phones that, in addition to the Basic phones usage,
contain a variety of applications.

Applications include texting, surfing the Internet,
interfacing to Outlook, creating documents, taking pictures, and so on. The company
uses a shared order processing department.

There are $25,000 in fixed order
processing costs each month, of which $20,000 are traceable to the two divisions by
the number of orders placed. 3,000 orders a month are processed by the MP3 Player
division and 7,000 orders a month are processed by the Cell Phone division. 1,000 of
the orders processed for the Cell Phone division cannot be traced to either product
line.

Facts related to the divisions and products for the month ended September 30,
2012, follow:


Requirements

1. Calculate the rate per order for Order Processing. Calculate the traceable fixed
costs for each division and for each product in the Cell Phone division.

2. Prepare an income statement for the company using the contribution margin
approach. Calculate net income for the company, divisional segment margin for
both divisions, and product segment margin for both products.

1 comment:

  1. The merchandising company has two
    divisions: Cell Phones and MP3 Players. The Cell Phone division has two main product
    lines: Basic and Advanced. Especialistas Contadores Publicos

    ReplyDelete