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book Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen cover

Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

النسخة 2الرقم المعياري الدولي: 978-1111824402
book Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen cover

Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

النسخة 2الرقم المعياري الدولي: 978-1111824402
تمرين 4
Keep-Or-Drop Decision, Alternatives, Relevant Costs
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dryand wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.
Keep-Or-Drop Decision, Alternatives, Relevant Costs  Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dryand wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.     While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:     In addition, Model 1 requires the rental of specialized equipment costing $20,000 per year. Required:  1. Reformulate the segmented income statement using the additional information on activities. 2. Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) 3. What if Reshier Company can only avoid 175 hours of engineering time and 5,000 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much?
While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:
Keep-Or-Drop Decision, Alternatives, Relevant Costs  Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dryand wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.     While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:     In addition, Model 1 requires the rental of specialized equipment costing $20,000 per year. Required:  1. Reformulate the segmented income statement using the additional information on activities. 2. Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) 3. What if Reshier Company can only avoid 175 hours of engineering time and 5,000 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much?
In addition, Model 1 requires the rental of specialized equipment costing $20,000 per year.
Required:
1. Reformulate the segmented income statement using the additional information on activities.
2. Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.)
3. What if Reshier Company can only avoid 175 hours of engineering time and 5,000 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much?
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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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