Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Total Units Regular Super 13,000 3,900 $338,000 $819,000 260,000 468,000 Sales revenue 16,900 $1,157,000 728,000 Less: Cost of goods sold Gross Margin $ 78,000 $351,000 $ 429,000 78,000 280,000 Less: Selling expenses Operating income (loss). 358,000 71,000 $ 0 $ 71,000 $ Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $30 per unit for Super. Variable selling expenses are $4 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued? Multiple Choice $0. $15,600 Increase. $26.000 Increase. $49.400 decrease. None of the answers is correct.

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Total Units Regular Super 13,000 3,900 $338,000 $819,000 260,000 468,000 Sales revenue 16,900 $1,157,000 728,000 Less: Cost of goods sold Gross Margin $ 78,000 $351,000 $ 429,000 78,000 280,000 Less: Selling expenses Operating income (loss). 358,000 71,000 $ 0 $ 71,000 $ Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $30 per unit for Super. Variable selling expenses are $4 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued? Multiple Choice $0. $15,600 Increase. $26.000 Increase. $49.400 decrease. None of the answers is correct.

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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Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Regular Super Total Units 16,000 3,000 19,000 Sales revenue $ 352,000 $ 690,000 $ 1,042,000 Less: Cost of goods sold 252,000 420,000 672,000 Gross Margin $ 100,000 $ 270,000 $ 370,000 Less: Selling expenses 100,000 143,000 243,000 Operating income (loss) $ 0 $ 127,000 $ 127,000 Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $15 per unit for Super. Variable selling expenses are $3 per unit for Regular and $15 per unit for Super; remaining selling amounts are fixed. If Omar Industries eliminates Regular and uses the available capacity to produce and sell an additional 1,600 units of Super, what would be the impact on operating income?
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Hancock Company manufactures and sells two lines of furniture, case goods and upholstery, During the most recent accounting period, the Case Goods and Upholstery Divisions sold 17,400 and 2,360 units, respectively. The company's most recent financial statements are shown below. Sales Less cost of goods sold: Unit-level production cost Depreciation, production equipment Gross margin Less operating expenses: Case Goods Upholstery $1,852,000 $472,000 1,156,000 276,000 $420,000 283,200 70,800 $118,000 Unit-level selling and administrative costs Corporate-level facility expenses (fixed) Net income (loss) If unit sales for both divisions increased 10% the company would report which of the following? 69,600 64,000 $286,400 59,000 64,000 $(5,000)
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Vikram Bhai
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