Istanbul Company makes special equipment. Each unit sells for $420. Istanbul uses just-in-time inventory procedures; it produces and sells 12,500 units per year. It has provided the following income statement data: Traditional Format Sales revenue $5,250,000 Cost of goods sold 3,100,000 Gross profit 2,150,000 Selling & admin. expenses 670,000 Operating income $1,480,000 A) increase by $16,940. B) decrease by $22,500. Contribution Margin Format Sales revenue Variable costs: C) increase by $27,500. Manufacturing Selling & admin. Contribution margin Fixed costs: Manufacturing Selling & admin. Operating income $5,250,000 1,200,000 400,000 3,650,000 1,900,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact the company's regular sales. The sales manager says that this sale will not require any additional selling and administrative costs, as it is a one-time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Istanbul accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) 270,000 $1,480,000
Istanbul Company makes special equipment. Each unit sells for $420. Istanbul uses just-in-time inventory procedures; it produces and sells 12,500 units per year. It has provided the following income statement data: Traditional Format Sales revenue $5,250,000 Cost of goods sold 3,100,000 Gross profit 2,150,000 Selling & admin. expenses 670,000 Operating income $1,480,000 A) increase by $16,940. B) decrease by $22,500. Contribution Margin Format Sales revenue Variable costs: C) increase by $27,500. Manufacturing Selling & admin. Contribution margin Fixed costs: Manufacturing Selling & admin. Operating income $5,250,000 1,200,000 400,000 3,650,000 1,900,000 A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact the company's regular sales. The sales manager says that this sale will not require any additional selling and administrative costs, as it is a one-time deal. The production manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Istanbul accepts the deal, how will this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) 270,000 $1,480,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Istanbul Company makes special equipment. Each unit sells for $420. Istanbul uses just-in-time inventory procedures; it produces and sells 12,500 units per year. It
has provided the following income statement data:
Traditional Format
Sales revenue
Cost of goods sold
$5,250,000
3,100,000
Gross profit
2,150,000
Selling & admin. expenses 670,000
Operating income
A) increase by $16,940.
Contribution Margin
Format
Sales revenue
Variable costs:
Manufacturing
Selling & admin.
$1,480,000 Operating income
B) decrease by $22,500.
Manufacturing
Selling & admin.
Contribution margin
C) increase by $27,500.
Fixed costs:
$5,250,000
1,200,000
400,000
3,650,000
A foreign company has offered to buy 110 units for a reduced sales price of $250 per unit. The marketing manager says the sale will have no negative impact the
company's regular sales. The sales manager says that this sale will not require any additional selling and administrative costs, as it is a one-time deal. The production
manager reports that there is plenty of excess capacity to accommodate the deal without requiring any additional fixed costs. If Istanbul accepts the deal, how will
this impact operating income? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
Oturumu Ka
1,900,000
270,000
$1,480,000
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