Fritz Furniture currently manufactures two unprofitable products: a couch and a chair. Yearly financial data related to the twoproducts is as follows:CouchSales$240,000Chair$174,000Variable expensesFixed expenses85,000190,00057,000138,000If eliminating the couch will reduce the fixed expenses associated with that product by 70% and eliminating the chair will reduce thefixed expenses associated with that product by 60%, thenFritz should discontinue both products.O Fritz should discontinue the couch.O Fritz shouldn't discontinue either product.O Fritz should discontinue the chair.

Couch ChairFixed Expenses (A)$190,000$138,000Traceable Percent of Total Fixed costs…

Answered: Fritz Furniture currently manufactures…

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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Diamond Boot Factory normally sells its specialty boots for $30 a pair. An offer to buy 85 boots for $25 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $12, and special stitching will add another $2 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization. Should Diamond Boot Factory accept or reject the special offer?
Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $78.30 per unit. Determine whether management should accept or reject the new business.
Diamond Boot Factory normally sells its specialty boots for $34 a pair. An offer to buy 85 boots for $30 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $12, and special stitching will add another $2 per pair to the cost Determine the differential income or loss per pair of boots from selling to the organization. Should Diamond Boot Factory accept or reject the special offer?
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) $10,000 ($50,000) $50,000 Next
McDonald Inc. sells two products: a regular and a deluxe version. The owner, lain, would like to better understand the impact of the sales mix on the company's sales. The following information is available: Sales price per unit Variable cost per unit Regular $45 $27 Deluxe $80 $32 The company has total fixed costs of $540,000 for the year and they sell 3 Regular products for every 2 Deluxe products. lain would like to know, given the sales mix, how many units of each product the company must sell per year to break even. The company must sell www units of the Regular product. Enter the number of units given the current sales mix. units of the Deluxe product. The company must sell Enter the number of units given the current sales mix.
Sheridan Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000. variable expenses of $363,000, and fixed expenses of $144,000. Therefore, the gloves and mittens line had a net loss of $27,000. If Sheridan eliminates the line, $36,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45))
Granfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $46,500 as shown below. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) If the backpack division is dropped, all $484,000 of its variable costs are avoidable, and $216,200 of its fixed costs are avoidable. The impact on Granfield's income from eliminating this business segment would be: Multiple Choice $494,000 decrease $216,200 increase $277,800 decrease $ 978,000 484,000 494,000 540,500 $ (46,500) $494,000 increase
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable number of customers. Data from the most recent period concerning these products appear below: Annual sales volume Unit selling price Variable expense per unit Contribution margin per unit Velcro 101,800 $ 1.65 $ 1.25 $ 0.40 Metal 203,600 $ 1.50 $ 0.70 $ 0.80 Nylon 407, 200 $ 0.85 $ 0.25 $ 0.60 Total fixed expenses are $407,200 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $247,200 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business. The company's managers would like to…
Valdespin Company manufactures three sizes of camping tents—small (S), medium (M), and large (L). The income statement has consistently indicated a net loss for the M size, and management is considering three proposals: (1) continue Size M, (2) discontinue Size M and reduce total output accordingly, or (3) discontinue Size M and conduct an advertising campaign to expand the sales of Size S so that the entire plant capacity can continue to be used. If Proposal 2 is selected and Size M is discontinued and production curtailed, the annual fixed production costs and fixed operating expenses could be reduced by $46,080 and $32,240, respectively. If Proposal 3 is selected, it is anticipated that an additional annual expenditure of $34,560 for the rental of additional warehouse space would yield an additional 130% in Size S sales volume. It is also assumed that the increased production of Size S would utilize the plant facilities released by the discontinuance of Size M. The sales and costs…

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