A study has been conducted to determine if Product A should be dropped. Sales of the product total $500,000; variable expenses total $340,000. Fixed expenses charged to the product total $210,000. The company estimates that $60,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the annual financial advantage (disadvantage) for the company of eliminating this product should be: Multiple Choice O($10,000) O $10,000 O ($50,000) O $50,000

A study has been conducted to determine if Product A should be dropped. Sales of the product total $500,000; variable expenses total $340,000. Fixed expenses charged to the product total $210,000. The company estimates that $60,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the annual financial advantage (disadvantage) for the company of eliminating this product should be: Multiple Choice O($10,000) O $10,000 O ($50,000) O $50,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 24P

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A study has been conducted to determine if Product A should be dropped. Sales of the product total $500,000; variable expenses total $340,000. Fixed expenses charged to the product total $210,000. The company estimates that $60,000 of these fixed expenses are not avoidable even if the product is dropped. If Product A is dropped, the annual financial advantage (disadvantage) for the company of eliminating this product should be: Multiple Choice ($10,000) $50,000 ($50,000) $10,000
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Patel Corporation is considering discontinuing one of its product lines. This product line generates a contribution margin of $330,000 per year. Fixed expenses allocated to the product line are $420,000 per year. It is estimated that $255,000 of these fixed expenses could be eliminated if the product line is discontinued. Based on this data, what is the financial advantage or disadvantage of discontinuing the product line? Multiple Choice Financial disadvantage of $75,000 per year. Financial advantage of $165,000 per year. Financial advantage of $75,000 per year.
Bright Times Co. is considering closing the table lamp segment. Current revenue was $78,000, with variable costs of $50,000, and fixed costs of $40,000. What is differential income or loss from the table lamp segment and should it be discontinued?
Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $59,000 for the past year as shown below. Segment Income (Loss) Sales. Variable costs. Contribution margin Fixed costs Income (loss) If the kitchen division is dropped, all $850,000 of its variable costs are avoidable, and $209,400 of its fixed costs are avoidable. The impact on Valdez's income from eliminating this business segment would be: Multiple Choice $80,600 decrease $290,000 increase $300,600 decrease $1,140,000 850,000 290,000 349,000 $ (59,000) $80,600 increase
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…
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: 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? 3. Suppose 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…
A company has five product lines, one of which has Fixed expenses of $173,657 and a Net loss of $40,203. If this product line is eliminated, 48% of the fixed expenses can be eliminated and the remainder will be allocated to other product lines. If management decides to eliminate this product line, the amount the company's net income will increase or decrease(-) is? Round to the nearest dollar and put a negative sign - before a decrease. Do not type the dollar sign.
The following information is for X Company's two products, A and B, last year: Product A Product B Sales $87,870 $92,940 Total variable costs 45,692 55,764 Total fixed costs 61,770 30,280 Profit $-19,592 $6,896 Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $28,940 of Product A's fixed costs and $6,300 of Product B's fixed costs are common costs that the company allocates to the two products. 1. If X Company drops Product A, company profits will change by 2. Assume that sales of Product B can be increased by $18,690 if Product A is dropped. What will be the effect of this increase on company profits?
The Draper Corporation is considering dropping its Doombug toy due to continuing losses. Data on the toy for the past year follow: Sales of 15,000 units $ 150,000 Variable expenses 120,000 Contribution margin 30,000 Fixed expenses 40,000 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
Phan Company has not reported a profit in five years. This year the company would like to narrow its loss to $18,000. Assuming its selling price is $42.50 per unit and its variable costs per unit are $30, how many units must be sold to achieve its target given that total fixed costs are $69,000? (Do not round intermediate calculations.) ook Multiple Choice rences 4,448 5,520 3,712 4,080
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