Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Units Regular 10,000 Super 3,700 Sales revenue Less: Cost of goods sold $ 240,000 $ 740,000 180,000 Total 13,700 $ 980,000 Gross Margin $ 60,000 Less: Selling expenses Operating income (loss) 60,000 $ 0 481,000 $ 259,000 134,000 661,000 $ 319,000 194,000 $ 125,000 $ 125,000 Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 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 О О $0 $10,400 increase
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Units Regular 10,000 Super 3,700 Sales revenue Less: Cost of goods sold $ 240,000 $ 740,000 180,000 Total 13,700 $ 980,000 Gross Margin $ 60,000 Less: Selling expenses Operating income (loss) 60,000 $ 0 481,000 $ 259,000 134,000 661,000 $ 319,000 194,000 $ 125,000 $ 125,000 Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 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 О О $0 $10,400 increase
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Vikram Bhai
Transcribed Image Text:Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.
Units
Regular
10,000
Super
3,700
Sales revenue
Less: Cost of goods sold
$ 240,000 $ 740,000
180,000
Total
13,700
$ 980,000
Gross Margin
$ 60,000
Less: Selling expenses
Operating income (loss)
60,000
$ 0
481,000
$ 259,000
134,000
661,000
$ 319,000
194,000
$ 125,000
$ 125,000
Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4
per unit for Regular and $20 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
О
О
$0
$10,400 increase
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