A firm contemplates to drop a segment that shows a contribution margin of P25,000. Overhead allocated to the segment amounts to P40,000 of which P17,500 cannot be eliminated. What is the effect of this discontinuance on the company’s profit before tax? (Indicate if increase or decrease, e.g. “2,000 increase” or “2,000 d
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A firm contemplates to drop a segment that shows a contribution margin of P25,000. Overhead allocated to the segment amounts to P40,000 of which P17,500 cannot be eliminated. What is the effect of this discontinuance on the company’s profit before tax? (Indicate if increase or decrease, e.g. “2,000 increase” or “2,000 decrease”)
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- 3A. Going Under Pvt. Ltd. provides outsourcing services for three areas: payroll, general ledger (GL), and tax compliance. The company is currently contemplating eliminating the GL area because it is showing a pre-tax loss. An annual Income statement follows (in 5000): SALES VARIABLE MANUFACTURING COSTS VARIABLE NON-MANUFACTURING COSTS DEPARTMENT FIXED COSTS (AVOIDABLE) ALLOCATED FIXED COSTS (UNAVOIDABLE) OPERATING PROFITS PAYROLL GL TAX $4,390 $5,500 $3,900 ($1,678) ($1,245) ($1,597) ($599) ($1,400) ($486) ($1,399) ($1,300) ($1,570) ($378) ($500) ($299) $1,446 ($545) $438 If corporate management drops the GL area, what impact would this have on total operating profit? (Give actual dollar impact on profit; "yes/no" answers are not acceptable) PICCarla Vista Company is considering two alternatives. Alternative A will have sales of $154,800 and costs of $100,100. Alternative B will have sales of $181,400 and costs of $131,800. Compare alternative A with alternative B showing incremental revenues, costs, and net income. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Revenues Costs Net income $ Alternative A is better than Alternative A Alternative B eTextbook and Media $ Alternative B $ Net Income Increase (Decrease)Cullumber Company is considering two alternatives. Alternative A will have sales of $158,500 and costs of $100,100. Alternative B will have sales of $180,900 and costs of $133,200. Compare alternative A with alternative B showing incremental revenues, costs, and net income. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Revenues Costs Net income $ $ Alternative A $ $ Alternative B $ $ Net Income Increase (Decrease)