8. Farmlt, Inc. has 2 small retail stores that specialize in fence supplies and small tools. Thecompany's income statement shows the following results for the current year.Fence SuppliesSmall ToolsSalesVariable CostsFixed CostsOperating IncomeTotal$1,000,000$ 600,000$ 350,000$ 50,000 $ 90,000$800,000$500,000$210,000$200,000$100,000$140.000($40,000)The company is concerned about future profits as sales have been dropping a small amountconsistently every year due to a new competitor. The accountant analyzed the fixed costs anddetermined that 40% is direct to fence supplies, 20% is direct to small tools, and 40% is allocatedone half to each product line. Determine the change to operating income if the company decidesnot to sell small tools.9. Use the information provided in 8. above for Farmlt, Inc. Farmlt, Inc. is considering addingheavy duty tools to the selection of tools they sell. Sales and contribution margin from heavyduty tools is expected to be $100,000 and $30,000 respectively. The stores will have to beremodeled at a cost of $15,000 and new shelves will have to be purchased at a cost of $4,000. Apurchasing manager will have to be hired who specializes in heavy duty tools for $38,000. 20%of the allocated fixed costs for the company will be allocated to heavy duty tools. Determine thechange to FarmIt, Inc.'s current operating income of $50,000 if the line is added.

Hi student Since there are multiple questions, we will answer only first question. Variable costs…

Answered: 8. Farmlt, Inc. has 2 small retail…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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