Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has beer losses on the knapsacks for some time, as shown by the contribution format income statement below:

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing
losses on the knapsacks for some time, as shown by the contribution format income statement below:
WILLIAMS PRODUCTS INC.
Income Statement-School Knapsacks
For the Quarter Ended June 30
Sales
Variable expenses:
Variable manufacturing expenses
Sales commissions
Shipping
Total variable expenses
Contribution margin
Fixed expenses:
Salary of product-line manager
General factory overhead
Depreciation of equipment (no resale value)
Advertising-traceable
Insurance on inventories
Purchasing department
Total fixed expenses
Operating loss
"Allocated on the basis of machine-hours.
*Allocated on the basis of sales dollars.
$58,800
23,100
6,300
7,500
42,100*
14,000
48,700
3,300
26,440
$210,000
88,200
121,800
142,040
$(20,240)
Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company's total
general factory overhead or total purchasing department expenses.
Transcribed Image Text:1 Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencing losses on the knapsacks for some time, as shown by the contribution format income statement below: WILLIAMS PRODUCTS INC. Income Statement-School Knapsacks For the Quarter Ended June 30 Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment (no resale value) Advertising-traceable Insurance on inventories Purchasing department Total fixed expenses Operating loss "Allocated on the basis of machine-hours. *Allocated on the basis of sales dollars. $58,800 23,100 6,300 7,500 42,100* 14,000 48,700 3,300 26,440 $210,000 88,200 121,800 142,040 $(20,240) Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company's total general factory overhead or total purchasing department expenses.
Required:
a. Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. (Input all
amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a
minus sign.)
Sales
Variable expenses:
Variable manufacturing expenses
Sales commissions
Shipping
Total variable expenses
Contribution margin
Fixed expenses:
Salary of product-line manager
General factory overhead
Depreciation of equipment
Advertising traceable
Insurance on inventories
Purchasing department
Total fixed expenses
Operating loss
Keep School Drop School
Knapsack
Knapsack
Difference:
Operating
Income
Increase or
(Decrease)
K
Transcribed Image Text:Required: a. Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. (Input all amounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by a minus sign.) Sales Variable expenses: Variable manufacturing expenses Sales commissions Shipping Total variable expenses Contribution margin Fixed expenses: Salary of product-line manager General factory overhead Depreciation of equipment Advertising traceable Insurance on inventories Purchasing department Total fixed expenses Operating loss Keep School Drop School Knapsack Knapsack Difference: Operating Income Increase or (Decrease) K
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