Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Chapter 7, Problem 7.8BE
Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000. and fixed costs $30,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated.
Determine whether to eliminate an unprofitable segment.
(LO 6). AP
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The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow:
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$
150,000
Variable expenses
120,000
Contribution margin
30,000
Fixed expenses
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Net operating loss
$
(10,000
)
If the toy were discontinued, Draper could avoid $8,000 per year in fixed costs. The remainder of the fixed costs are not avoidable. Suppose that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a $16,000 increase in the contribution margin received from these other toys. If all other conditions are the same, the financial advantage (disadvantage) from discontinuing the production and sale of Doombugs would be:
$28,000
($6,000)
($2,000)
$14,000
The Draper Company is considering dropping its Dream bug toy due to continuing losses. Revenue and cost data on the toy for the past year follow:
Sales of 15,000 units
P 150,000
Variable expenses
120,000
Contribution margin
30,000
Fixed expenses
40,000
Net operating loss
(P 10,000)
If the toy were discontinued, then Draper could avoid P8,000 per year in fixed costs.
1. Suppose again that if the Doombug toy is dropped, the production and sale of other Draper toys would increase so as to generate a P16,000 increase in the contribution margin received from these other toys. At what selling price per Doombug should Draper be indifferent (on economic grounds) between dropping the Doombug or continuing its production and sale? (All other conditions remain the same, including annual sales of 15,000 units of the Doombug toy.)
A) P 8.33 B) P 9.25 C) P 9.60 D) P 10.70
The Draper Company is considering dropping its Dream bug toy due to continuing losses. Revenue and cost data on the toy for the past year follow:
Sales of 15,000 units
P 150,000
Variable expenses
120,000
Contribution margin
30,000
Fixed expenses
40,000
Net operating loss
(P 10,000)
If the toy were discontinued, then Draper could avoid P8,000 per year in fixed costs.
1. Under the given conditions, the change in annual operating income from discontinuing the production and sale of Doombugs would be:
A) P 30,000 decrease B) P 10,000 increase C) P 22,000 decrease D) P 18,000 increase
2. Assuming all other conditions stay the same, at what level of annual sales of Doombugs (in units) should Draper be indifferent to discontinuing Doombugs or continuing the production and sale of Doombugs?
A) 20,000 B) 18,000 C) 6,000 D) 4,000…
Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
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