A segment of a company reports the following loss for the year. All $178,500 of its variable costs are avoidable, and $110,000 of itsfixed costs are avoidable.Segment Income (Loss)SalesVariable costsContribution marginFixed costsIncome (loss)$ 255,000178,50076,500115,000(38,500)(a) Compute the income increase or decrease from eliminating this segment.(b) Should the segment be eliminated?Complete this question by entering your answers in the tabs below.Required ARequired BCompute the income increase or decrease from eliminating this segment.Segment Elimination AnalysisIncome Increase(Decrease)SalesVariable costsContribution marginFixed costsIncome (loss)ContinueEliminate$255,000178,50076,500115,000$(38,500)

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Answered: A segment of a company reports the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) OA. Increase $275,000 0 0 0 0 Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the space formerly used to produce the Fashion line is used to increase the production of Hiking boots to 250% of the current production, how will operating income be affected? Increase $211,500 OC. Increase $152,500 OB. Total Hiking $530,000 $390,000 $395,000 275,000 135,000 76,000 $59,000 D. Decrease $152,500 115,000 38,000 $77,000 Fashion $140,000 120,000 20,000 38,000 $(18,000)
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector Industry. Supply the missing data in the table below: (Loss amounts should be Indicated by a minus sign. Do not round your Intermediate calculations.) Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income $ $ Company A 390,000 168,000 16 % 17 % Company B $ 800,000 $ 54,000 $ 20 % 46,000 % S S S Company C 550,000 148,000 % 11 % 7,000
The Consumer Division of Lewandowski Company has income from operations of $93,950 and assets of $367,000. The minimum acceptable return on assets is 8%. What is the residual income for the division?$fill in the blank 1
Management and accounting Spencer Company is considering closing one of its product lines. Current data on the product line is as follows:DescriptionSales revenue $20,000Variable costs$17,000Direct avoidable fxed costs $7,000Indirect allocated fxed costs $5,000Net Income Loss on the product line ($9,000) *The direct avoidable fxed costs will be eliminated if the product line is closed. **The indirect allocated fxed costs will remain the same whether the product line is continued or closed.In addition, if Spencer closes the product line, Spencer can sublease its production facility to another company and earn subleaserevenue of $2,700 per year. Assume that Spencer decides to discontinue this product line. By how much will overall company net income change? Company net income will INCREASE by $9000Company net income will DECREASE by $9000Company net income will DECREASE by $6700Company net income will INCREASE by $6700
Wildhorse Company is considering two alternatives. Alternative A will have revenues of $149,900 and costs of $103,900. Alternative B will have revenues of $184,300 and costs of $123,800. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Revenues Costs Net Income Alternative B Alternative A $ tA $ Alternative A is better than $ LA LA $ Alternative B LA LA $ Net Income Increase (Decrease)
Pharoah Corporation's Cajun Spice division has a segment margin is $434200 for the current reporting period. The division has an asset turnover of 3.1. Segment margin as a percentage of sales is 10%. What is the division's ROI? O 31% O 10% O 21% O The answer cannot be determined from the information given.
A business received an offer from an exporter for 10,000 units of product at a special price of $15.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $21 Unit manufacturing costs: Variable 12 Fixed 5 What is the amount of the gain or loss from acceptance of the offer? a. $8,000 loss b. $15,000 loss c. $35,000 gain d. $30,000 gain
Cullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows: Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income A $2,247,000 1,632,000 $615,000 $517,000 15,900 93,900 $626,800 $(11,800) B $1,404,000 600,400 $803,600 $430,000 10,000 81,600 $521,600 $282,000 C $1,809,300 1,095,200 $714,100 $520,000 20,600 105,000 $645,600 $68,500 Total $5,460,300 3,327,600 $2,132,700 $1,467,000 46,500 280,500 $1,794,000 $338,700 Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees.
The Alligator segment of Wildhorse Specialty Meats is operating at a loss and has the following data: Sales Variable expenses Fixed expenses $7320007 512400 366000 If the Alligator segment is eliminated, what will be the effect on the remaining company? Assume that 50% of the fixed expenses will be eliminated and the rest will be allocated to the segments of the remaining company. O $439200 increase. O $36600 decrease. O $36600 increase. O $183000 increase.
The Alligator segment of Carla Vista Specialty Meats is operating at a loss and has the following data: Sales S 576000 Variable expenses 403200 Fixed expenses 288000 If the Alligator segment is eliminated, what will be the effect on the remaining company? Assume that 50% of the fixed expenses will be eliminated and the rest will be allocated to the segments of the remaining company. Select answer from the options below $28800 increase. $28800 decrease. $345600 increase. $144000 increase.
Manor Company plans to discontinue a department that has a contribution margin of$24,000and 548,000 in foed costs. of the fixed costs,$21,000cannot be avoided. The effect of this discontinuance on Manor's overall net operating income would be an: a increase of$24,000 b increase of$3,000 c. decrease of$3,000 d. decrease of$24,000
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Department A $ 350,000 120,000 230,000 140,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice O $(133,800) The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 6%. What is the financial advantage (disadvantage) of discontinuing Department B? O $(128,000) $(113,800) Total $ 800,000 320,000 480,000 400,000 $ 80,000 O $(124,000) Department B $ 450,000 200,000 250,000 260,000 $90,000 $ (10,000)

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