Diego Company manufactures one product that is sold for 78 p

Diego Company manufactures one product that is sold for $78 per unit in two geographic regions-the East and West regions. The following information pertains to the company\'s first year of operations in which it produced 49,000 units and sold 44,000 units. Variable costs per unit: Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 28 14 4 ei $686,000 Fixed selling and administrative expenses 510,000 Fixed manufacturing overhead The company sold 32,000 units in the East region and 12,000 units in the West region. It determined that $230,000 of its fixed selling and administrative expenses is traceable to the West region, $180,000 is traceable to the East region, and the remaining $100,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

Solution

10 &11 Computation of Net Operating Profit or Loss Particular Amount Amount Sales 78 3432000 Variable Manufacturing Cost 46 2024000 Variable Selling & Admin Expense 6 264000 Contribution Margin 26 1144000 Fixed Expense Fixxed Manufacturing Overhead 686000 Fixed Selling and Administrative 510000 1196000 Net operating Loss -52000 Note : Produced and Sold unit are same hence result from Absorption costing or variable costing will be the same. 13. Computation of East and West Region Margin Particular Total Company East West No. of Unit 44000 32000 12000 Sales @$78 3432000 2496000 936000 Less: Variable cost of Goods Sold @$52 2288000 1664000 624000 Contribution Margin 1144000 832000 312000 Fixed Manufacturing Overhead 686000 Traceable Fixed Selling & Admin Expense 410000 180000 230000 Region Segment Margin 276000 652000 82000 Less: Common Fixed Expense not traceable 100000 Net operating Income (Loss) 176000 14. Additional contribution margin in Eastern Region=RevenueX Contrinution Margin = 2496000X5%=$124800 15. Changes in profit=Foregone Segment margin of West Region+ Additional Conttribution Margin =(82000)+124800=$42800