The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 16,600 and 3,600 units,respectively. The company's most recent financial statements are shown below:SalesLess cost of goods sold:Unit-level production costDepreciation, production equipmentGross marginLess operating expenses:Unit-level selling and administrative costsCorporate-level facility expenses (fixed)Net income (loss)Based on this information, the company should:Multiple ChoiceIt is impossible to determine with the given information.Pro$996,000664,000149,000$183,000Keep the Novice line because it contributes $99,000 to total profitability.Eliminate the Novice line because it is operating at a loss.44,00039,840$99,160Keep the Novice line because it contributes $72,000 to total profitability.Novice$432,000243,00090,000$99,000117,00039,840$(57,840)

If division is closed there will not contribution and fixed cost will be = $90,000+$39,840 =…

of goods sold: el production cost tion, production equipment in ting expenses: el selling and administrative costs e-level facility expenses (fixed) (loss) nformation, the company should: Pro Novice $996,000 $432,000 664,000 149,000 $183,000 44,000 39,840 $99, 160 243,000 90,000 $99,000 117,000 39,840 $(57,840)

of goods sold: el production cost tion, production equipment in ting expenses: el selling and administrative costs e-level facility expenses (fixed) (loss) nformation, the company should: Pro Novice $996,000 $432,000 664,000 149,000 $183,000 44,000 39,840 $99, 160 243,000 90,000 $99,000 117,000 39,840 $(57,840)

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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King Company has two divisions whose most recent financial statements are shown below: Residential Division Commercial Division 5,340 $417,000 Unit sales Sales Less: cost of goods sold: Unit-level production costs Depreciation, production equipment Gross margin Less: operating expenses: Unit-level selling and administrative Corporate-level facility costs (fixed) Net income (loss) Unit sales Sales Less: cost of goods sold: Unit-level production costs Depreciation, production equipment Required: a. Compute the impact on profit if the Residential Division is eliminated. Gross margin Less: operating expenses: Unit-level selling and administrative Corporate-level facility costs (fixed) Net income (loss) 176,700 83,500 $156,800 Commercial Division Yes No 41,700 21,000 $94, 100 b. Do you recommend that King eliminate the Residential Division? 1,340 $117,000 61,700 33,500 $21,800 11,700 16,000 $(5,900)
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