Cary Company manufactures two products called Jazzy and Soul that sell for $100 and $50, respectively. Each product uses only one type of raw materials that costs $5 per pound. The company has the capacity to annually produce 8,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Sales Direct materials Direct labor Variable manufacturing overhead Direct Fixed manufacturing overhead Variable selling expenses Common Fixed Expenses Total cost per unit $96,000 $0 Jazzy $48,000 $600,000 150,000 90,000 $30,000 36,000 84,000 66,000 78,000 $96,000 Soul $300,000 The company's direct fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 60,000 72,000 24,000 Assume Cary normally produces and sells 6,000 of each product per year. What would the new income (loss) be if Cary were to discontinue the Soul line? 96,000 42,000 48,000 ($42,000)

Cary Company manufactures two products called Jazzy and Soul that sell for $100 and $50, respectively. Each product uses only one type of raw materials that costs $5 per pound. The company has the capacity to annually produce 8,000 units of each product. Its average cost per unit for each product at this level of activity is given below: Sales Direct materials Direct labor Variable manufacturing overhead Direct Fixed manufacturing overhead Variable selling expenses Common Fixed Expenses Total cost per unit $96,000 $0 Jazzy $48,000 $600,000 150,000 90,000 $30,000 36,000 84,000 66,000 78,000 $96,000 Soul $300,000 The company's direct fixed manufacturing overhead is avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 60,000 72,000 24,000 Assume Cary normally produces and sells 6,000 of each product per year. What would the new income (loss) be if Cary were to discontinue the Soul line? 96,000 42,000 48,000 ($42,000)

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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