The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows:Sales revenueVariable costsContribution marginFixed costsOperating income (loss)Blankets$620,000Pillows$298,000Total$918,000(465,000) (242,000) (707,000)$155,000 $56,000 $211,000(75,000) (74,000) (149,000)$80,000 $(18,000)$62,000Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate$74,000 of total fixed costs. How would this business decision impact operating income?A. increase of $130,000 in operating incomeOB. increase of $18,000 in operating incomeOC. decrease of $56,000 in operating incomeOD. increase of $74,000 in operating income

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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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Asha Inc. and Samir Inc. have the following operating data: Sales Variable costs Contribution margin Fixed costs Asha Inc. $2,500,000 (1,500,000) $1,000,000 (800,000) $200,000 Asha Inc. Samir Inc. Samir Inc. $4,000,000 (2,500,000) $1,500,000 (900,000) $600,000 Operating income a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. 150 75 Samir Inc. b. How much would operating income increase for each company if the sales of each increased by 30%? Dollars Percentage 30 % 30 % c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha Inc.'s higher operating leverage means that its fixed costs are a smaller Inc.'s. percentage of contribution margin than are Samir
The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed... Total cost of goods sold. Gross profit.. Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss).... Product Line Industrial Systems $330,000 Household Systems Total $360,000 $690,000 $ 35,000 $44,000 $79,000 250,000 67,000 317,000 $285,000 $ 45,000 Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $111,000 $396,000 $249,000 $294,000 62,000 39,000 $101,000 $99,000 $200,000 $ (56,000) $150,000 $94,000 76,000 138,000 23,000 62,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that…
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The following income statements illustrate different cost structures for two competing companies: Income Statements Number of customers (a) Sales revenue (a $200) Variable cost (ax $140) Contribution margin Fixed cost Net income Company Name Hill 200 $40,000 N/A 40,000 (28,000) $12,000 Creek 200 $40,000 (28,000) 12,000 0 $12,000 Required a. Reconstruct Hill's income statement, assuming that it serves 400 customers when it lures 200 customers away from Creek by lowering the sales price to $120 per customer. b. Reconstruct Creek's income statement, assuming that it serves 400 customers when it lures 200 customers away from Hill by lowering the sales price to $120 per customer. Complete this question by entering your answers in the tabs below.
The following income statements illustrate different cost structures for two competing companies: Number of customers (a) Sales revenue (a × $220) Variable cost (a × $190) Contribution margin Fixed cost Net income Income Statements Required Company Name Jordan 86 $18,920 (16,340) 2,580 0 $2,580 Munoz 86 $18,920 N/A 18,920 (16,340) $2,580 a. Reconstruct Munoz's income statement, assuming that it serves 172 customers when it lures 86 customers away from Jordan by lowering the sales price to $120 per customer. b. Reconstruct Jordan's income statement, assuming that it serves 172 customers when it lures 86 customers away from Munoz by lowering the sales price to $120 per customer.
A tile manufacturer has supplied the following data: Boxes of tiles produced and sold Sales revenue Variable manufacturing expense Fixed manufacturing expense Variable selling and administrative expense Fixed selling and administrative expense Net operating income a. b. $ $ What is the company's unit contribution margin? $0.86 per unit $2.35 per unit $4.10 per unit $1.75 per unit C. d. 520,000 2,132,000 650,000 $ 464,000 $ 260,000 $ 312,000 $ 446,000
Compute the missing amounts in the contribution income statement shown below: (Round "Per Unit" answers to 2 decimal places.) Number of units sold Sales Variable costs Contribution margin Fixed costs Income Company A Total Per unit $ 567,100 $107.00 360,400 $ 132,500 Company B 2,500 Total 155,000 212,500 77,500 Per unit Ⓒ []
Shown below is a segmented income statement for Orzo Company's three laminated flooring product lines: Line Item Description Strip Plank Parquet Total Sales revenue $400,000 $200,000 $300,000 $900,000 Less: Variable expenses 225,000 120,000 250,000 595,000 Contribution margin $175,000 $ 80,000 $ 50,000 $305,000 Less direct fixed expenses: Machine rent 5,000 20,000 42,000 67,000 Supervision 15,000 10,000 20,000 45,000 Depreciation 35,000 10,000 25,000 70,000 Segment margin $120,000 $ 40,000 $ (37,000) $123,000 Orzo's management is deciding whether to keep or drop the parquet product line. Orzo's parquet flooring product line has a contribution margin of $50,000 (sales of $300,000 less total variable costs of $250,000). All variable costs are relevant. Relevant fixed costs associated with this line include $42,000 in machine rent and $5,000 in supervision salaries. 1) Which alternative is more cost effective and by how much?____
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Perez Munoz Number of customers (a) 81 81 Sales revenue (a × $250) $ 20,250 $ 20,250 Variable cost (a × $175) N/A (14,175 ) Variable cost (a × $0) 0 N/A Contribution margin 20,250 6,075 Fixed cost (14,175 ) 0 Net income $ 6,075 $ 6,075 Required Reconstruct Perez’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Munoz by lowering the sales price to $150 per customer. Reconstruct Munoz’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Perez by lowering the sales price to $150 per customer.
Compute the missing amounts in the contribution income statement shown below: (Round "Per Unit" answers to 2 decimal places.) Number of units sold Sales Variable costs Contribution margin Fixed costs Income Company A Per unit Total S 374,100 $ 87.00 249,400 $ 86,000 Company B 2,250 Total 94,500 123,750 47,250 Per unit
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Baird Adams 88 $ 21,120 (15,840) N/A 88 Number of customers (a) Sales revenue (a X $240) Variable cost (a x $180) Variable cost (a x $0) Contribution margin Fixed cost $ 21,120 N/A 21,120 (15,840) 5,280 Net income $ 5,280 $4 $ 5,280 Required a. Reconstruct Baird's income statement, assuming that it serves 176 customers when it lures 88 customers away from Adams by lowering the sales price to $140 per customer. b. Reconstruct Adams's income statement, assuming that it serves 176 customers when it lures 88 customers away from Baird by lowering the sales price to $140 per customer. Complete this question by entering your answers in the tabs below. Required A Required B Reconstruct Baird's income statement, assuming that it serves 176 customers when it lures 88 customers away from Adams by lowering the sales price to $140 per customer. BAIRD COMPANY Income…
The accountant for PNW, LLC has prepared a contribution format income statement. Assume that the following information is within the relevant range. Sales (9,000 units) Variable expenses Contribution margin Fixed expenses $540,000 405,000 135,000 130,500 Net operating income $ 4,500 Assuming that the information provided is within the relevant range, the contribution margin ratio is closest to:

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