Head Bucket, Inc. has two product lines—batting helmets and football helmets. The income statement data for the most recent year is as follows: Total Batting Helmets Football Helmets Sales revenue $950,000 $600,000 $350,000 Variable costs (480,000) (200,000) (280,000) Contribution margin $470,000 $400,000 $70,000 Fixed costs (182,000) (90,000) (92,000) Operating income (loss) $288,000 $310,000 $(22,000) Assuming the football helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the football helmet line is used to double the production of batting helmets, operating income will be ________. A. $400,000 B. $310,000 C. $182,000 D. $618,000

Head Bucket, Inc. has two product lines—batting helmets and football helmets. The income statement data for the most recent year is as follows: Total Batting Helmets Football Helmets Sales revenue $950,000 $600,000 $350,000 Variable costs (480,000) (200,000) (280,000) Contribution margin $470,000 $400,000 $70,000 Fixed costs (182,000) (90,000) (92,000) Operating income (loss) $288,000 $310,000 $(22,000) Assuming the football helmet line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the football helmet line is used to double the production of batting helmets, operating income will be ________. A. $400,000 B. $310,000 C. $182,000 D. $618,000

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

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Chapter2: Building Blocks Of Managerial Accounting

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Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...

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Armor Sports, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most recent year is as follows: Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) Total $940,000 (540,000) $400,000 (200,000) $200,000 Batting Helmets $600,000 (250,000) $350,000 OA. Operating income will increase by $60,000. OB. Operating income will increase by $90,000. OC. Operating income will decrease by $340,000. D. Operating income will decrease by $50,000. (90,000) $260,000 Football Helmets $340,000 (290,000) $50,000 (110,000) $(60,000) What is the effect of dropping football helmets line on the operating income of the company? (Assume that fixed costs remain unchanged and that there would be no adverse effect on other sales.)
Tike Industries is an apparel company that makes and sells both casual wear and sportswear. Here are data for the current year: Sales revenue Variable costs Contribution margin Traceable fixed costs Segment margin Common fixed costs Operating income Total $ 1,000,000 745,000 $255.000 (80,000) $175,000 (90,000) $85,000 Casual wear $ 450,000 388,000 $62,000 (25,000) $37,000 (42,000) S(5,000) Sportswear 5 pts $ 550,000 357,000 $193,000 (55,000) $138,000 (48,000) $90,000 Tike's accountant allocated the common fixed costs between the product lines based on sales revenue. Tike plans to discontinue the production of casual wear and use the freed-up capacity to triple the production and sale of sportswear. Although this will eliminate the traceable fixed costs for casual wear, the traceable fixed costs for sportswear will double. If Tike discontinues the casual wear product line, what would be the amount of the increase in Tike's operating income? Round to the nearest whole dollar and do not…
Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs. Wood used to produce desks ($125,00 per desk) Production labor used to produce desks ($15 per hour) Production supervisor salary ($45,000 per year) Depreciation on factory equipment ($60,000 per year) Selling and administrative expenses ($45,000 per year) Rent on corporate office ($44,000 per year) Nails, glue, and other materials required to produce desks (varies per desk) Utilities expenses for production facility Sales staff commission (5% of gross sales)
Bed & Bath, a retalling company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,220,000 1,220,000 3,000,000- 2,340,000 5.660,000 Department Hardware $ 3,200,000 819,000 2,381,000 1,490,000 $ 891,000 Linens $1,020,000 401,000 619,000 850,000 $ (231,000) A study indicates $375,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 17% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)
JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Per Unit Annual Total Sales (420,000 units) $ 7.00 $ 2,940,000 Variable costs Direct materials 1.46 613,200 Direct labor 0.44 184,800 Variable overhead 0.70 294,000 Contribution margin 4.40 1,848,000 Fixed costs Fixed overhead 0.30 126,000 Fixed general and administrative 0.25 105,000 Income $ 3.85 $ 1,617,000 A potential customer offers to buy 52,000 units for $3.70 each. These sales would not affect the company’s sales through its normal channels. Details about the special offer follow. Direct materials cost per unit and variable overhead cost per unit would not change. Direct labor cost per unit would be $0.62 because the offer would require overtime pay. Accepting the offer would require incremental fixed general and administrative costs of $5,200. Accepting the offer would require no…
Pottery Unlimited has two product lines: cups and pitchers. Income statement data for the most recent year follow: Total Cups Pitchers Sales revenue $460,000 $310,000 $150,000 Variable expenses 355,000 235,000 120,000 Contribution margin 105,000 75,000 30,000 Fixed expenses 76,000 38,000 38,000 Operating income (loss) $29,000 $37,000 $(8,000) If $29,679 in fixed costs will be eliminated by dropping the Pitcher line, how will operating income be affected? If income drops, use a negative sign in front of the number.
Johnson Company manufactures and sells different colors of dry erase markers. Results from last year from the sale of green markers is given below: Sales revenue (79,000 units @ $4 each) Variable costs ..... Contribution margin Fixed costs: Salaries of line supervisors Advertising expense ... Allocated general overhead Net loss ... .. $316,000 $237,000 $ 79,000 $ 43,000 $ 28,000 $ 19,000 $ Johnson Company is considering eliminating the green dry erase markers product line. The company has determined that if the green markers are discontinued, the contribution margin of its other products will increase by $7,000. Calculate the amount of the decrease in company profits if the green dry erase markers product line is discontinued. Do not enter your answer in carmen with a negative sign in front of the number.
The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (10,400 skates @ $58 each) $ 603,200 Variable costs (10,400 skates at $24) 249,600 Fixed costs 190,000 Earnings before interest and taxes (EBIT) $ 163,600 Interest expense 62,000 Earnings before taxes (EBT) $ 101,600 Income tax expense (20%) 20,320 Earnings after taxes (EAT) $ 81,280 a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.) b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.) c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
Solaria Inc. manufactures mechanical pencils. Based on past experience, the company has found that total delivery costs can be represented by the following formula: Delivery costs = $4,800 + 1.25 X where X = the number mechanical pencils produced. Last year, Solaria Inc. produced 15,000 mechanical pencils. Actual delivery costs for the year were as expected. What is the total delivery costs incurred by the company last year? What is the total fixed delivery costs incurred last year? What is the total variable delivery costs incurred last year? What is the delivery cost per unit produced? What is the fixed delivery cost per unit? What is the variable delivery costs per unit?
The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Dirt Bikes Mountain Bikes $ 933,000 $267,000 $ 407,000 $ 259,000 190,000 Racing Bikes Total Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 455,000 478,000 113,000 152,000 154,000 217,000 107,000 69,800 43,000 114,100 186,600 413,500 40,500 7,200 8,700 20,600 40,100 53,400 20,600 15, 200 35,500 51,800 38,500 81,400 122,800 167,600 123,100 Net operating income (loss) $64,500 $ 31,200 $ 49,400 $(16,100) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing…
JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Annual Total Sales (600,000 units) Variable costs Per Unit $ 7.00 $ 4,200,000 Direct materials Direct labor 984,000 1.64 0.56 336,000 Variable overhead 0.60 360,000 Contribution margin Fixed costs 4.20 2,520,000 Fixed overhead 0.20 Fixed general and administrative 120,000 90,000 0.15 Income $ 3.85 $ 2,310,000 A potential customer offers to buy 70,000 units for $3.60 each. These sales would not affect the company's sales through its normal channels. Details about the special offer follow • Direct materials cost per unit and variable overhead cost per unit would not change. . Direct labor cost per unit would be $0.71 because the offer would require overtime pay, Accepting the offer would require incremental fixed general and administrative costs of $7,000 Accepting the offer would require no incremental fixed overhead costs…
Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,330,000 $ 3,170,000 $ 1,160,000 Variable expenses 1,331,000 923,000 408,000 Contribution margin 2,999,000 2,247,000 752,000 Fixed expenses 2,140,000 1,310,000 830,000 Net operating income (loss) $ 859,000 $ 937,000 $ (78,000) A study indicates that $375,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 15% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?

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	Total	Batting Helmets	Football Helmets
Sales revenue	$950,000	$600,000	$350,000
Variable costs	(480,000)	(200,000)	(280,000)
Contribution margin	$470,000	$400,000	$70,000
Fixed costs	(182,000)	(90,000)	(92,000)
Operating income (loss)	$288,000	$310,000	$(22,000)