Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines:TotalStrip$891,000Sales revenueLess: Variable expensesContribution marginLess direct fixedexpenses:Machine rentSupervisionDepreciation$402,000220,000$182,0002.(5,000)(19,500)(24,500)$133,000(20,000)(13,000)(7,000)Segment margin$28,000Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquetflooring product line has a contribution margin of $56,000 (sales of $301,000 less total variable costs of$245,000). All variable costs are relevant.120,000$68,000For the plank line?$fill in the blank 3Plank$188,000DropKeepby $fill in the blank 5.Parquet$301,000245,000585,000$56,000 $306,000(54,000)(6,500)(17,500)$(22,000)Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet'ssupervision salaries. In addition, assume that dropping the parquet product line would reduce sales of thestrip line by 15% and sales of the plank line by 10%. All other information remains the same.(79,000)(39,000)(49,000)$139,000This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform therequired analysis, and input your answers in the questions below.Open spreadsheetRequired:1.If the parquet product line is dropped, what is the contribution margin for the strip line?$fill in the blank 2Which alternative (keep or drop the parquet product line) is now more cost effective and by howmuch?

The contribution margin is the amount above the variable cost of sales included in the selling…

Shown below is a segmented income statement for Hickory Company's three wooden flooring product lines: Strip $402,000 220,000 $182,000 $68,000 Sales revenue Less: Variable expenses Contribution margin Less direct fixed expenses: Machine rent Supervision Depreciation (5,000) (19,500) (24,500) $133,000 2. 120,000 For the plank line? $fill in the blank 3 Plank (20,000) (13,000) (7,000) Segment margin $28,000 Hickory's management is deciding whether to keep or drop the parquet product line. Hickory's parquet flooring product line has a contribution margin of $56,000 (sales of $301,000 less total variable costs of $245,000). All variable costs are relevant. $188,000 DropKeep by $fill in the blank 5 245,000 $56,000 Parquet $301,000 585,000 $306,000 (54,000) (6,500) (17,500) $(22,000) (79,000) (39,000) (49,000) $139,000 Total Relevant fixed costs associated with this line include 70% of parquet's machine rent and all of parquet's supervision salaries. In addition, assume that dropping the parquet product line would reduce sales of the strip line by 15% and sales of the plank line by 10%. All other information remains the same. $891,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Required: 1. If the parquet product line is dropped, what is the contribution margin for the strip line? $fill in the blank 2 Which alternative (keep or drop the parquet product line) is now more cost effective and by how much?

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 45E