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    Management Accounting: prepare a segmented income statement for Pumpkin, Inc.

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    Prepare income statement

    Part B
    Pumpkin Inc. has two departments, X and Y. A recent monthly income statement for the company follows:

    Department
    X Y Total
    Sales 3,000,000 2,000,000 5,000,000
    Less Variable Costs 1,100,000 900,000 2,000,000
    Contribution Margin 1,900,000 1,100,000 3,000,000
    Less Fixed Costs 1,300,000 1,200,000 2,500,000
    Operating income(loss) 600,000 (100,000) 500,000

    An analysis of the total fixed expenses show that 1,000,000 of the fixed expenses
    are allocated costs. These fixed expenses are allocated based on percentage of sales revenue.
    Management is thinking about dropping Department Y based on the statement above.
    a. Prepare a revised Income Statement, if department Y is dropped.
    b. Prepare a segment income statement if the company does not drop department Y.
    What do you recommend management should do? Why?

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    https://brainmass.com/business/income-statement/management-accounting-prepare-a-segmented-income-statement-for-pumpkin-inc-5882

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    Department
    X % Y % Total
    Sales 3,000,000 60.0% 2,000,000 40.0% 5,000,000
    Less Variable Costs 1,100,000 900,000 2,000,000
    Contribution Margin 1,900,000 1,100,000 3,000,000
    Less Fixed Costs 1,300,000 1,200,000 2,500,000
    Operating income(loss) 600,000 (100,000) 500,000

    a. Revised Income Statement if Department Y is ...

    Solution Summary

    The solution presents two income statements with commentary on both and a conclusion about whether to keep both departments.

    $2.19

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