Homework Help is Here – Start Your Trial Now!
Business
Accounting
(Note: This type of decision is similar to dropping a product line.) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 76,000 litres of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $65 per litre, variable costs are $39 per litre, fixed manufacturing overhead costs in the plant total $437,000 per month, and the fixed selling costs total $585,200 per month. Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Nicholas Company's sales to temporarily drop to only 19,000 litres per month. Nicholas Company's management estimates that the strikes will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does close down the plant, fixed manufacturing overhead costs can be reduced by $114,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $20,040. Since Nicholas Company uses lean production methods, no inventories are on hand. Required: 1-a. Assuming that the strikes continue for two months, compute the increase or decrease in income from closing the plant. Net income is by in two months

(Note: This type of decision is similar to dropping a product line.) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 76,000 litres of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $65 per litre, variable costs are $39 per litre, fixed manufacturing overhead costs in the plant total $437,000 per month, and the fixed selling costs total $585,200 per month. Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Nicholas Company's sales to temporarily drop to only 19,000 litres per month. Nicholas Company's management estimates that the strikes will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does close down the plant, fixed manufacturing overhead costs can be reduced by $114,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $20,040. Since Nicholas Company uses lean production methods, no inventories are on hand. Required: 1-a. Assuming that the strikes continue for two months, compute the increase or decrease in income from closing the plant. Net income is by in two months

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
See similar textbooks
icon
Related questions
Question

Sagar

(Note: This type of decision is similar to dropping a product line.) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 76,000 litres of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $65 per litre, variable costs are $39 per litre, fixed manufacturing overhead costs in the plant total $437,000 per month, and the fixed selling costs total $585,200 per month. Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Nicholas Company's sales to temporarily drop to only 19,000 litres per month. Nicholas Company's management estimates that the strikes will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does close down the plant, fixed manufacturing overhead costs can be reduced by $114,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $20,040. Since Nicholas Company uses lean production methods, no inventories are on hand. Required: 1-a. Assuming that the strikes continue for two months, compute the increase or decrease in income from closing the plant. Net income is by in two months
Transcribed Image Text:(Note: This type of decision is similar to dropping a product line.) Nicholas Company manufactures a fast-bonding glue, normally producing and selling 76,000 litres of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $65 per litre, variable costs are $39 per litre, fixed manufacturing overhead costs in the plant total $437,000 per month, and the fixed selling costs total $585,200 per month. Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Nicholas Company's sales to temporarily drop to only 19,000 litres per month. Nicholas Company's management estimates that the strikes will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Nicholas Company's management is thinking about closing down the plant during the strike. If Nicholas Company does close down the plant, fixed manufacturing overhead costs can be reduced by $114,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $20,040. Since Nicholas Company uses lean production methods, no inventories are on hand. Required: 1-a. Assuming that the strikes continue for two months, compute the increase or decrease in income from closing the plant. Net income is by in two months
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
steps

Unlock instant AI solutions

Tap the button
to generate a solution

SEE SOLUTION
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
SEE MORE TEXTBOOKS