Kahn Corporation (a multi-product company) produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. If Product X is discontinued, $50,000 of the $60,000 in annual fixed costs charged to Product X could be eliminated. The annual financial advantage (disadvantage) for the company of eliminating this product should be:

Kahn Corporation (a multi-product company) produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. If Product X is discontinued, $50,000 of the $60,000 in annual fixed costs charged to Product X could be eliminated. The annual financial advantage (disadvantage) for the company of eliminating this product should be:

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

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Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Patel Corporation is considering discontinuing one of its product lines. This product line generates a contribution margin of $330,000 per year. Fixed expenses allocated to the product line are $420,000 per year. It is estimated that $255,000 of these fixed expenses could be eliminated if the product line is discontinued. Based on this data, what is the financial advantage or disadvantage of discontinuing the product line? Multiple Choice Financial disadvantage of $75,000 per year. Financial advantage of $165,000 per year. Financial advantage of $75,000 per year.
Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
Key Corporation is considering the addition of a new product. The expected cost and revenue data for the new product are as follows: Annual sales Selling price per unit. Variable costs per unit: Production Selling Avoidable fixed costs per year: Production Selling Multiple Choice $325,000 Allocated common fixed corporate costs per year If the new product is added, the combined contribution margin of the other, existing products is expected to drop $65,000 per year. Total common fixed corporate costs would be unaffected by the decision of whether to add the new product. If the new product is added next year, the financial advantage (disadvantage) resulting from this decision would be: O $200,000 $145,000 2,500 units $304 $135,000 $125 $49 $ 50,000 $ 75,000 $ 55,000
A company wants to expand by offering a new product. Expected cost and revenue data for this product are: Annual sales 5,000 units Unit selling price ? Unit variable costs: Production $ 30.20 Selling 6. Incremental fixed costs per year: 32:16 Production $35,000 Selling $45,000 If the company adds this new product, sales of its other product lines will be impacted, causing the contribution margin of other product lines to drop by $18,500 per year. What is the lowest price the company could charge for its new product without affecting the company's total profits? Multiple Choice $39.90 $52.20
XYZ Company is facing changes in its cost structure so that fixed costs will decrease from $600,000 to $500,000, but variable costs will increase from $12 per unit to $14 per unit. If it were to implement these changes at its current production level of 50,000 units (with no change to selling price), profit would not change. What would happen to the ?company's profit if the changes were implemented, and production decreased to 45,000 units It will decrease .a O none of the given answers.b O .It will stay the same .c O It will increase d O
Leonard Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: O ($30,000) O $30,000 O $40,000 O ($40,000)
Dull Corporation produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows: Variable production cost $ 16 Fixed production cost 20 Unit product cost $ 36 The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
Lusk Corporation produces and sells 15,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: O A. $70,000 O B. ($70,000) O C.($30,000) O D. $30,000
If the company adds the new product expects the contribution margin of other product lines to drop by $18,500 per year. What is the financial advantage (disadvantage) of adding the new product? a) $25,000 b) $86,500 c)$6,500 d) $43,500
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
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) $50,000 ($50,000) $10,000