Consider the following table of Actual earnings:Firm AFirm BActual earnings $rBVt-1a. $1,000b. So$c. $1,500d. $(1,000)6,00010100,000%Firm CS0)$14,0008150,000%$ 18,00012$ 190,000Assume that Firm A can increase earnings $4,000 by cutting costs. Abnormal earnings would be:Multiple Choice%

Abnormal earnings represent the difference between actual earnings and expected earnings.

Consider the following table of Actual earnings: Firm A Firm B Actual earnings S r BV₁-1 a. $1,000 • b. SO S c. $1,500 d. $(1,000) 6,000 10 100,000 % Firm C S S 14,000 8 150,000 % $ 18,000 12 Assume that Firm A can increase earnings $4,000 by cutting costs. Abnormal earnings would be: Multiple Choice $ 190,000 %

Consider the following table of Actual earnings: Firm A Firm B Actual earnings S r BV₁-1 a. $1,000 • b. SO S c. $1,500 d. $(1,000) 6,000 10 100,000 % Firm C S S 14,000 8 150,000 % $ 18,000 12 Assume that Firm A can increase earnings $4,000 by cutting costs. Abnormal earnings would be: Multiple Choice $ 190,000 %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company shows you the following data: Sales Costs: Variable costs Fixed costs Total costs Income (loss) Product Data O $20,000 decrease O $30,000 increase O $30,000 decrease O $20,000 increase F Product G Total $300,000 $210,000 $340,000 $850,000 $180,000 $180,000 $220,000 $580,000 50,000 50,000 40,000 140,000 $230,000 $230,000 $260,000 $720,000 $ 70,000 $(20,000) $ 80,000 $130,000 Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. How much would net income for the current year change if they discontinue Product G?
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A company’s forecasted sales are $300,000 and its sales at break-even are $180,000. Its margin of safety in dollars is a. $180,000. c. $480,000. e. $300,000. b. $120,000. d. $60,000.

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