1. Calculate the change in income if Tipton closes its wallpaper operation.2.Should Tipton close its wallpaper operation? Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single store location in suburbanDes Moines. Although the company has been very profitable over the years, management has seen a significant decline inwallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeplydiscounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow.●SalesVariable costsFixed costsTotal costsOperating income (loss)●Paint andSupplies$ 380,000$ 228,00056,000$ 284,000$ 96,000Carpeting$ 460,000$ 322,00075,000$ 397,000$ 63,000Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line isdropped, the following changes are expected to occur:Wallpaper$ 140,000$ 112,00045,000$ 157,000$ (17,000)The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet.Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by fivepercentage points.Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred.Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies areexpected to fall by 20 percent.The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line.

Paint And Supplies Carpenting WallpaperSales…

Answered: 1. Calculate the change in income if…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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1. Calculate the change in income if Tipton closes its wallpaper operation. 2.Should Tipton close its wallpaper operation?