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Jokkmok Industries-Mr. Rosen is the manager of a division of Jokkmok Industrie

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Question;Jokkmok Industries;Mr. Rosen is the manager of a division of;Jokkmok Industries. He is one of several managers being considered for the;position of CEO, as the current CEO is retiring in a year.;All divisions use standard absorption costing.;The division has the capacity to produce 50,000 units a quarter and quarterly;fixed overhead amounts to $600,000. Mr. Rosen has been looking at the report;for the first three months of the year and is not happy with the results.;Division Income;Statement;For the Quarter;Ending March 31, 2013;Production: 25,000 units;Sales (25,000 units);$2,500,000;Cost of goods sold;1,800,000;Gross profit;$700,000;Selling & general expenses;350,000;Net income;$350,000;The sales forecast for the second quarter is;25,000 units. Mr. Rosen had budgeted second quarter production at 25,000 units;but changes it to 50,000 units, which is total capacity for a quarter. The;sales forecasts for each of the last two quarters of the year remain at 25,000;units. Actual fixed costs incurred remain constant in total and variable costs;remain constant on per unit basis.;Case Assignment;Required;Computations;?;Convert the divisional absorption income statement to a;contribution margin income statement for the quarter. showing how to convert from one approach to another. This;example is for guidance only and the numbers have no bearing on Jokkmok;Industries. You can also find several videos on YouTube that explain the;difference between the two types of income statements.;?;Prepare absorption and contribution margin income statements for;the succeeding quarter for the division.;?;Compute production costs per unit for both approaches and for;both quarters.

 

Paper#43638 | Written in 18-Jul-2015

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