9. Assuming the management chooses the first option, which amount the product lines will be eliminated?a. La-Lisab. Jenniec. Jisood. Rose_____ 10. Assuming the management chooses to discontinue the unprofitable product line, what is the net impact to the Company’s overall profit?a. P 7,000b. P 17,000c. P 13,000d. P 23,000 The Blackpink, Inc. has four product-lines namely – La-Lisa, Jennie, Jisoo, and Rose. Data on sales andexpenses for the immediately preceding year are as follows: (in thousands)9.La-LisaP 350,000 P90,000 P 150,00030,000TotalJennieJisooRoseP 60,00035,00025,000P 50,00015,00035,000SalesVariable Costs140,000210,00060,000Contribution Margin60,00090,000Fixed costs:Advertising, traceableDepreciationSalaries of product-line managers6,0008,00010,00012,00036,00030,0008,00060,00010,0006,00014,0009,00013,00030,00066,00031,00045,00070,00012,00018,00010,000Allocated common fixed costs*10,00058,000Total fixed costs206,00046,000Net operating income (loss)P4,000 P 14,000 P 24,000 (P 11,000) (P 23,000)Units sold1,5003,0002,000400*Allocated based on sales in pesoManagement is concerned about the continued losses of Jisoo and Rose and ask you a for a recommendation.Salaries of product line managers could be eliminated if the respective unprofitable product line isdiscontinued. The equipment used to produce each product can still be used for other purposes.After careful evaluation, you provided the following options for the management to decide.To discontinue the unprofitable product line and use its current equipment to produce La-Lisa which willresult to an increase in its sales by 20%.To invest in improving equipment used in the production of the unprofitable product-line to reduce itsvariable cost by 50%. The cost of improvement is P10,000, which will be depreciated on a straight-linebasis for five years. The cost of capital is 8%.To cease the production of the unprofitable product line but instead purchase its entire productrequirement from Jennie, which is currently operating at excess capacity. Jennie, however, will need toincur additional P5.00 per unit to adjust its products to the design set by the unprofitable product-line.The managers agreed at a price equal to 140% of the total relevant costs incurred by Jennie. The unusedequipment will then be used to produce Jisoo, which will result to an increase in its sales by 50%.Further, 95% of the existing variable costs of the unprofitable product line will be eliminated.

Blackpink Inc. has 4 product lines - La-Lisa, Jennie, Jisoo and Rose. Two products out of the 4 are…

9. Assuming the management chooses the first option, which amount the product lines will be eliminated? a. La-Lisa b. Jennie c. Jisoo d. Rose _____ 10. Assuming the management chooses to discontinue the unprofitable product line, what is the net impact to the Company’s overall profit? a. P 7,000 b. P 17,000 c. P 13,000 d. P 23,000

9. Assuming the management chooses the first option, which amount the product lines will be eliminated? a. La-Lisa b. Jennie c. Jisoo d. Rose _____ 10. Assuming the management chooses to discontinue the unprofitable product line, what is the net impact to the Company’s overall profit? a. P 7,000 b. P 17,000 c. P 13,000 d. P 23,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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