Appel Inc. has two product lines: phones and laptops. They are considering dropping the phone segment to improve their net operating income. Data for each per unit is as follows: Phones Laptops Revenue $530 $1099 Variable Costs $245 $430 Traceable Fixed Costs $300 $209 Allocated Fixed Costs $110 $130 Total Per Unit $(125) $330 Assume no allocated fixed costs are avoidable if the phone segment is dropped, but 100% of traceable fixed costs can be avoided. If Appel Inc. sells 1,824 units of phones and 555 units of laptops, how much will their net operating income increase/decrease if the phone segment is dropped? Pound vOur answor to the noarest dellar

Appel Inc. has two product lines: phones and laptops. They are considering dropping the phone segment to improve their net operating income. Data for each per unit is as follows: Phones Laptops Revenue $530 $1099 Variable Costs $245 $430 Traceable Fixed Costs $300 $209 Allocated Fixed Costs $110 $130 Total Per Unit $(125) $330 Assume no allocated fixed costs are avoidable if the phone segment is dropped, but 100% of traceable fixed costs can be avoided. If Appel Inc. sells 1,824 units of phones and 555 units of laptops, how much will their net operating income increase/decrease if the phone segment is dropped? Pound vOur answor to the noarest dellar

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 13MC: Mallorys Video Supply has changed its focus tremendously and as a result has dropped the selling...

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Mallorys Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further? A. $5 per unit profit 8. $16 per unit profit C. $3 per unit loss D. $12 per unit loss
Cesar Company has three product lines: A, B and C. The information given below is available. Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without ?increasing fixed costs. What will happen to operating income Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A S100,000 76,000 24,000 9,000 6.000 $9.000 Product B $90,000 48,000 42,000 18,000 9,000 $15.000 Product C $44,000 35,000 9,000 3,000 7.700 S(1,700) increase by $18,000 O increase by ST15,000 () increase by $36,000 increase by $24,000 increase by $42,000 )
Cesar Company has three product lines: A, B and C. The information given below is available. Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without ?increasing fixed costs. What will happen to operating income Product B Product C Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A $100,000 76,000 24,000 9,000 6,000 $9.000 $90,000 48,000 42,000 18,000 9,000 $15.000 $44,000 35,000 9,000 3,000 7,700 S(1,700) increase by $42,000 O increase by $18,000 increase by $36,000 increase by $15,000 ) increase by $24,000
Sprite company must decide on a make or buy decision. A supplier has offered to make the product at the same quality. Fixed marketing costs would be unaffected but variable marketing costs would be reduced by 30%. What is the maximum amount per unit that Sprite can pay the supplier without decreasing its operating income? P6.75 P9.75 P5.75 P5.05
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin es Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 210,000 T-2 $ 268,000 72,000 22,500 $ 115,500 134,000 52,000 $ 82,000 77,000 23,000 62,000…
Pepper Industries has three product lines, A, B, and C. The following information is available: A B C Sales R60 000 R90 000 R24 000 Variable costs R36 000 R48 000 R15 000 Contribution margin R24 000 R42 000 R9 000 Fixed costs: Avoidable 9 000 18 000 6 000 Unavoidable 6 000 9 000 5 400 Operating income R9 000 R15 000 R(2 400) Pepper Industries is thinking of dropping product line C because it is reporting a loss. Assuming Pepper drops line C and does not replace it, the operating income will : decrease by R3 000 increase by R2 400 increase by R3 000 decrease by R5 400
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales. Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income T-1 $ 200,000 1. 2. Required % increase in sales from T-1 3. Required % increase in sales from T-1 70,000…
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs. Fixed selling and administrative Total fixed expenses Operating income Required: T-1 $ 200,000 70,000 20,000 $ 110,000 58,700 14,300 $ 73,000 T-2 $ 260,000 130,000 50,000 $ 80,000…
2. A computer maker is considering improving its product. It currently produces a desktop computer at a marginal cost of $249, and the computer sells for $289. The improved version of its product would have a new marginal cost of $289 and would be priced at $359. What volume hurdle does this manufacturer face?
Relevant and irrelevant costs: 1. DeCesare Computers makes 5,200 units of a circuit board, CB76 at a cost of $280 each. Variable cost per unit is $190 and fixed cost per unit is $90. Peach Electronics offers to supply 5,200 units of CB76 for $260. If DeCesare buys from Peach it will be able to save $10 per unit in fixed costs but continue to incur the remaining $80 per unit. Should DeCesare accept Peach’s offer? Explain. 2. LN Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: Old Machine New Machine Original cost $10,700 $9,000 Useful life 10 years 3 years Current age 7 years 0 years Remaining useful life 3 years 3 years Accumulated depreciation $7,490 Not acquired yet Book value $3,210 Not acquired yet Current disposal value (in cash ) $2,200 Not acquired yet Terminal disposal value (3 years from now) $0 $0 Annual cash operating costs $17,500…
Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $36,000 as follows: Drafty Model $300,000 210,000 $ 90,000 84,000 $6,000 42,000 $(36,000) Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Net operating income (loss) Eliminating the Drafty product line would eliminate $84,000 of direct fixed costs. The $42,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit by