4. Istanbul company makes special equipment. Each unit sells for $420. Istanbul uses just in time inventory procedure: it produces and sells $12500 units per year. It has provided the following income statement data: Contribution margin format Traditional format Sale revenue Cost of goods sold Gross profit Selling and admin exp $670,000 Selling and admin exp Contribution margin $5,250,000 Sales revenue $3,100,000 Variable cost $2,150,000 Manufacturing $5,250,000 $1,200,000 $400,000 $3,650,000 Fixed costs Manufacturing Selling and admin Operating income $1,480,000 Operating income A foreign company has offered to buy 110 units for a reduced sales price$250 per unit. The marketing manage says the sale will have no negative impact the company's regular sales. The sales manager says that this will not require any additional selling and administrative costs. As it is one time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Istanbul accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar). A. Increase by $16,940 B. Decrease by $27,500 C. Increase by $27,500 D. Decrease by $16,940 E. Decrease by $22,500 $1,900,000 $270,000 $1,480,000
4. Istanbul company makes special equipment. Each unit sells for $420. Istanbul uses just in time inventory procedure: it produces and sells $12500 units per year. It has provided the following income statement data: Contribution margin format Traditional format Sale revenue Cost of goods sold Gross profit Selling and admin exp $670,000 Selling and admin exp Contribution margin $5,250,000 Sales revenue $3,100,000 Variable cost $2,150,000 Manufacturing $5,250,000 $1,200,000 $400,000 $3,650,000 Fixed costs Manufacturing Selling and admin Operating income $1,480,000 Operating income A foreign company has offered to buy 110 units for a reduced sales price$250 per unit. The marketing manage says the sale will have no negative impact the company's regular sales. The sales manager says that this will not require any additional selling and administrative costs. As it is one time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Istanbul accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar). A. Increase by $16,940 B. Decrease by $27,500 C. Increase by $27,500 D. Decrease by $16,940 E. Decrease by $22,500 $1,900,000 $270,000 $1,480,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:4. Istanbul company makes special equipment. Each unit sells
for $420. Istanbul uses just in time inventory procedure: it
produces and sells $12500 units per year. It has provided
the following income statement data:
Traditional format
Contribution margin format
Sale revenue
$5,250,000 Sales revenue
Cost of goods sold $3,100,000 Variable cost
Gross profit
$2,150,000 Manufacturing
Selling and admin exp $670,000 Selling and admin exp
Contribution margin
Fixed costs
Manufacturing
Selling and admin
$1,480,000 Operating income
$5,250,000
$1,200,000
$400,000
$3,650,000
$1,900,000
$270,000
$1,480,000
Operating income
A foreign company has offered to buy 110 units for a reduced
sales price $250 per unit. The marketing manage says the sale
will have no negative impact the company's regular sales.
The sales manager says that this will not require any
additional selling and administrative costs. As it is one time
deal. The production manager reports that there is plenty of
excess capacity to accommodate the deal without requiring
any additional fixed costs.
If Istanbul accepts the deal, how will this impact operating
income? (Round any intermediate calculations to the nearest
cent and your final answer to the nearest dollar).
A. Increase by $16,940
B. Decrease by $27,500
C. Increase by $27,500
D. Decrease by $16,940
E. Decrease by $22,500
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