The Dodson Company manufactures and distríbutes three types of electronic products, Zymol, Zybat and Zycot. The following details the unit sales, selling prices and manufacturing costs of the three electronic devices: Zymol $100 Zybat $120 Zycot $180 Sales Price Manufacturing Cost $60 $80 $110 Number ofunits sold 15,000 13,000 12,000 Selling, general and administrative(SG&A) expenses are $1,170,000. SG&Aexpenses are currently being allocated based upon sales revenue for the three products. The Dodson Companyis considering allocating SG&A expenses underan activity based costing methodology as follows: Upon further investigation of the SG&A expenses, (50 percent) are shown to be for marketing and advertising. Each product has its own advertising and marketing budget, administered by one of the three marketing managers. Zycot, the premier product, is advertisedheavily. Sixty percent of the marketing and advertising budget goes toward Zycot, twenty percent to Zymol and twenty percent to Zybat. The remaining SG&A expenses consist of distribution and administrative costs (25 percent) and selling costs (25 percent). The distribution and administration department is responsible for arranging shipping and for billing the customers. Customers pay transportation charges directly to the common carrier. Upon analysis, each electronic product places equal demands on the distribution and administration departmentand each consumes about the same resources as the others. Selling costs consist primarily of commissions paid to independent salespeople. The commissions are based upon gross margin on the product (ie: sales revenue less manufacturing costs). Required: 1. Prepare an income statement for each of the three electronic products with SG&A expenses allocated based upon sales revenue for the three products. Identify the most and least profitable products. 2. Prepare an income statement for each of the three electronic products with SG&A expenses allocated based upon activity based costing for the three products. Identify the most and least profitable product

The Dodson Company manufactures and distríbutes three types of electronic products, Zymol, Zybat and Zycot. The following details the unit sales, selling prices and manufacturing costs of the three electronic devices: Zymol $100 Zybat $120 Zycot $180 Sales Price Manufacturing Cost $60 $80 $110 Number ofunits sold 15,000 13,000 12,000 Selling, general and administrative(SG&A) expenses are $1,170,000. SG&Aexpenses are currently being allocated based upon sales revenue for the three products. The Dodson Companyis considering allocating SG&A expenses underan activity based costing methodology as follows: Upon further investigation of the SG&A expenses, (50 percent) are shown to be for marketing and advertising. Each product has its own advertising and marketing budget, administered by one of the three marketing managers. Zycot, the premier product, is advertisedheavily. Sixty percent of the marketing and advertising budget goes toward Zycot, twenty percent to Zymol and twenty percent to Zybat. The remaining SG&A expenses consist of distribution and administrative costs (25 percent) and selling costs (25 percent). The distribution and administration department is responsible for arranging shipping and for billing the customers. Customers pay transportation charges directly to the common carrier. Upon analysis, each electronic product places equal demands on the distribution and administration departmentand each consumes about the same resources as the others. Selling costs consist primarily of commissions paid to independent salespeople. The commissions are based upon gross margin on the product (ie: sales revenue less manufacturing costs). Required: 1. Prepare an income statement for each of the three electronic products with SG&A expenses allocated based upon sales revenue for the three products. Identify the most and least profitable products. 2. Prepare an income statement for each of the three electronic products with SG&A expenses allocated based upon activity based costing for the three products. Identify the most and least profitable product

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 1CE: Thomas Corporation produces heating units. The following values apply for a part used in their...

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