Acme Company has two product lines, Product X and Product Z. Here are data for the current year: Product Z $550,000 357,000 $193,000 (55,000) $138,000 Sales revenue Variable costs Contribution margin Traceable fixed costs Segment margin O $239.000 O $294.000 $331,000 $349,000 Total $1,000,000 Acme's common fixed costs are $90,000 and its operating income is $85,000. Acme plans to discontinue the production of Product X and use the freed-up capacity to triple the production and sale of Product Z. Although this will eliminate the traceable fixed costs for Product X, the traceable fixed costs for Product Z will double. How much will operating income increase if Acme discontinues the production and sale Product X? haun 745,000 $255,000 (80,000) $175,000 Product X $450,000 388,000 $62,000 (25,000) $37,000
Acme Company has two product lines, Product X and Product Z. Here are data for the current year: Product Z $550,000 357,000 $193,000 (55,000) $138,000 Sales revenue Variable costs Contribution margin Traceable fixed costs Segment margin O $239.000 O $294.000 $331,000 $349,000 Total $1,000,000 Acme's common fixed costs are $90,000 and its operating income is $85,000. Acme plans to discontinue the production of Product X and use the freed-up capacity to triple the production and sale of Product Z. Although this will eliminate the traceable fixed costs for Product X, the traceable fixed costs for Product Z will double. How much will operating income increase if Acme discontinues the production and sale Product X? haun 745,000 $255,000 (80,000) $175,000 Product X $450,000 388,000 $62,000 (25,000) $37,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Acme Company has two product lines, Product X and Product Z. Here are data for the current year:
Product X
Product Z
Sales revenue
Variable costs
Contribution margin
Traceable fixed costs
Segment margin
O $239.000
Total
$1,000,000
745,000
$255,000
(80,000)
$175,000
O $294.000
O $331,000
$349,000
None of the above
$450,000
388,000
$62,000
(25,000)
$37,000
Acme's common fixed costs are $90,000 and its operating income is $85,000. Acme plans to
discontinue the production of Product X and use the freed-up capacity to triple the production and
sale of Product Z. Although this will eliminate the traceable fixed costs for Product X, the traceable
fixed costs for Product Z will double. How much will operating income increase if Acme discontinues
the production and sale Product X?
$550,000
357,000
$193,000
(55,000)
$138,000
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