Alberta Gauge Company, Ltd., a small manufacturing company in Calgary, Alberta, manufactures three types of electrical gauges used in a variety of machinery. For many years the company has been profitable and has operated at capacity. However,

YOU WILL GET A WORD DOCUMENT WITH SOLUTIONS:

JoAnn Brower says that Alberta Gauge Company’s product-line income statement for the second quarter is not suitable for analyzing proposals and making decisions such as the ones suggested by Alice Carlo. Write a memo to Alberta Gauge’s president that addresses the following points.
a. Explain why the product-line income statement as presented is not suitable for analysis and decision making.
b. Describe an alternative income-statement format that would be more suitable for analysis and decision making, and explain why it is better.
2. Use the operating data presented for Alberta Gauge Company and assume that the president’s proposed course of action had been implemented at the beginning of the second quarter. Then evaluate the president’s proposal by specifically responding to the following points.
a. Are each of the three suggestions cost-effective? Support your discussion with an analysis that shows the net impact on income before taxes for each of the three suggestions.
b. Was the president correct in proposing that the R-gauge line be eliminated? Explain your answer.
c. Was the president correct in promoting the Q-gauge line rather than the E-gauge line? Explain your answer.
d. Does the proposed course of action make effective use of the company’s capacity? Explain your answer.
3. Are there any qualitative factors that Alberta Gauge Company’s management should consider before it drops the R-gauge line? Explain your answer.

b. Was the president correct in proposing that the R-gauge line be eliminated? Explain your answer

c. Was the president correct in promoting the Q-gauge line rather than the E-gauge line? Explain your answer.

d. Does the proposed course of action make effective use of the company’s capacity? Explain your answer.

3. Are there any qualitative factors that Alberta Gauge Company’s management should consider before it drops the R-gauge line? Explain your answer.