1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
morpeh [17]
3 years ago
8

Devern Assurance Company provides both property and automobile insurance. The projected income statements for the two products a

re as follows: Property Insurance Automobile Insurance Sales $4,200,000 $12,000,000 Less variable expenses 3,830,000 9,600,000 Contribution margin $370,000 $2,400,000 Less direct fixed expenses 400,000 500,000 Segment margin $(30,000) $1,900,000 Less common fixed expenses (allocated) 100,000 200,000 Operating income (loss) $(130,000) $1,700,000 The president of the company is considering dropping the property insurance. However, some policyholders prefer having their property and automobile insurance with the same company, so if property insurance is dropped, sales of automobile insurance will drop by 12 percent. No significant non-unit-level activity costs are incurred.
1. As a supporting computation, prepare a segmented income statement for the keep-or-drop decision.

2.Assume that dropping all advertising for the property insurance line and increasing the corporate advertising budget by $450,000 will increase sales of property insurance by 10 percent and automobile insurance by 8 percent. Prepare a segmented income statement that reflects the effect of increased advertising.
Business
1 answer:
Jobisdone [24]3 years ago
6 0

Answer:

Explanation:

Severn Assurance company.

Decision to drop the Assurance division will result in the below group financials:

Property division:

Sales 10,560,000

Variable expense 8,448,000

Contribution Margin 2,112,000

Direct Fixed Expense 500,000

Segment Margin 1,612,000

Common fixed expense 300,000

Operating income $1,312,000

Prior to the decision to stop the property division, ney income for the group was $1,570,000

This decision leads to decrease in operating income I consider it not acceptable.

Decision: keep property insurance division.

B.

Decision to drop all Property advertising costs of $400,000

And take group advertising spend up by $450,000

Expected to see a growth in sales of property by 10% and automobile by 8%.

Property insurance division Income statement

Sales $4,620,000

Variable costs 4,213,000

Contribution Margin 407,000

Direct fixed expense 0

Segment Margin 407,000

Common fixed expense 250,000

Operating income $157,000

Automobile insurance division Income statement

Sales $12,960,000

Variable costs 10,368,000

Contribution Margin 2,592,000

Direct fixed expense 500,000

Segment Margin 2,092,000

Common fixed expense 500,000

Operating income $1,592,000

Total business net income = $1,749,000

Which is an increase of $179,000 over the original Net income projections.

You might be interested in
Individuals performing in professional jobs are compensated initially for their ________.
scoray [572]

Answer:

A

Explanation:

4 0
3 years ago
A candy store sells boxes of candy containing caramels and cremes. Each box sells for $12.50 and hold 30 pieces of candy (all pi
evablogger [386]

Answer:

Number of caramels = 20

number cremes = 30 - 20 = 10

Explanation:

Data provided in the question:

Selling cost of each box = $12.50

Number of pieces of candies held in a box = 30

Cost of producing caramel = $0.25

Cost of producing cremes = $0.45

Now,

let the number of caramels be 'x'

Thus,

Number of cremes = 30 - x

Profit = Selling price - Cost

3 = $12.50 - [ 0.25x + 0.45(30 - x) ]

or

[ 0.25x + 0.45(30 - x) ] = 12.50 - 3

or

0.25x + 13.5 - 0.45x = 9.50

or

-0.20x = 9.50 - 13.5

or

-0.20x = - 4

or

x = 20

Hence,

Number of caramels = 20

number cremes = 30 - 20 = 10

6 0
3 years ago
Issued a cheque of rs. 39000 to Saurya stores in full settlement. <br>journal entry​
Semmy [17]

Answer:

When issuing a check to a creditor as is being done here, you need to debit the creditors account (Accounts Payable) to show that you are paying off the debt.

You also need to credit cash because a credit will show that cash was used to pay for something and so has reduced.

Date               Account Title                                                  Debit            Credit

XX-XX-XXX   Accounts Payable - Saurya Stores             Rs. 39,000

                       Cash                                                                                Rs. 39,000

4 0
3 years ago
With respect to advertising, _____ opinion leadership can involve presenting the results of surveys showing that a high percenta
Bad White [126]
The answer is stimulating.
3 0
3 years ago
Sam has been directed to study the demographic, economic, political, and cultural forces that affect an organization. In this in
viva [34]

Answer:

Macro environment

Explanation:

The macro environment refers to external factors of the organization that can affect its performance and results. For a company it is important to study this factors to know the environment in which it is going to work and be able to develop strategies and goals that adjust to this.

5 0
3 years ago
Other questions:
  • I am in a class this year that is similar to a class i took last year. it's not plagiarism if submit the paper i wrote for that
    10·1 answer
  • Jerod has saved plenty of money and has a lucrative business that he enjoys. he likes to volunteer his time in the community and
    7·1 answer
  • Inferring Transactions from Financial Statements
    9·1 answer
  • In a closed​ economy, aggregate expenditure is
    9·1 answer
  • Tool Makers, Inc. make garden rakes extremely well and of the best quality in the industry. Their rakes are difficult to copy, a
    11·1 answer
  • A corporation is considering expanding operations to meet growing demand. With the capital expansion the current accounts are ex
    14·1 answer
  • 1. Sorensen Systems Inc. is expected to pay a $2.00 dividend at year end (D1 = $2.00), the dividend is expected to grow at a con
    11·1 answer
  • Bella’s Beauties sells vacuums and shampooers. The vacuums have a unit selling price of $60 and unit variable costs of $20. The
    7·1 answer
  • Social elements common to this work. Note that common contexts are listed toward the top, and less common contexts are listed to
    7·2 answers
  • Many people cite research that says in a face-to-face interaction, ____ percent of communication is through body language.
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!