May you please answer both questions (: Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day plus materials. Due to his-physical condition, David, an elderly gentleman, needs adownstairs room converted to a bathroom. Ken has produced a bid for $5,200 to complete the bathroom. He did not provide David with the details of the bid. However, they areshown here.Ken's Bid Detail DollarsDirect Material$2,300Direct Labor1,600Variable overhead300Fixed overhead500Profit500$5,200A. The town's social services has asked Ken if he could reduce his bid to $4,200. Should Ken accept the counter offer?Current BidNew BidDirect Material$2,300$2,300Direct Labor1,6001,600Variable overhead300300Fixed overhead500Profit500$5,200$4,200B. How much would his income be reduced?PreviousNext Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can beavoided if a segment is dropped. The information is available for the segments.CustomLogoEmbroideryApparelSales$61,000$251,000Variable costs29,000111,000Contribution margin$32,000$140,000Direct fixed costs22,00040,000Allocated common fixed costs13,00051,000Net income$(3,000)$49,000A. What will be the impact on net income if the embroidery segment is dropped?Net income $B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel?Contribution marginNet incomeC. Identify one cost that is not relevant in this analysis.

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Answered: downstairs room converted to a…

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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May you please answer both questions (:

Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day plus materials. Due to his-physical condition, David, an elderly gentleman, needs a
downstairs room converted to a bathroom. Ken has produced a bid for $5,200 to complete the bathroom. He did not provide David with the details of the bid. However, they are
shown here.
Ken's Bid Detail Dollars
Direct Material
$2,300
Direct Labor
1,600
Variable overhead
300
Fixed overhead
500
Profit
500
$5,200
A. The town's social services has asked Ken if he could reduce his bid to $4,200. Should Ken accept the counter offer?
Current Bid
New Bid
Direct Material
$2,300
$2,300
Direct Labor
1,600
1,600
Variable overhead
300
300
Fixed overhead
500
Profit
500
$5,200
$4,200
B. How much would his income be reduced?
Previous
Next

Transcribed Image Text:Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $61,000 $251,000 Variable costs 29,000 111,000 Contribution margin $32,000 $140,000 Direct fixed costs 22,000 40,000 Allocated common fixed costs 13,000 51,000 Net income $(3,000) $49,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin Net income C. Identify one cost that is not relevant in this analysis.

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