13XYZ Company is considering eliminating a department that has an annual contribution marginof $35,000 and $70,000 in annual fixed costs. Of the fixed costs, $20,000 cannot be avoided.The annual financial advantage (disadvantage) for the company of eliminating thisdepartment would be$15,000($35,000)$35,000($15,000)

Contribution margin is the difference between the revenue and variable cost. And the profit of the…

Answered: XYZ Company is considering eliminating…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bran Corporation plans to discontinue a division that generates a total contribution margin of $40,000 per year. Fixed overhead associated with this division is $150,000, of which $100,000 cannot be eliminated. What will be the impact on Bran's overall profitability if the division is discontinued? Increase by $60,000. None of these. Decrease by $60,000. Increase by $10,000. Decrease by $10,000.
Carolina Enterprise operates three product segments: sinks, bathtubs, and toilet bowls. Below are the figures showing how each product segment performed in 2022. If Carolina drops any segment, it can avoid 40% of the fixed costs allocated to the dropped segment. In 2023, should the sink segment be dropped in order to improve Carolina's financial performance? Sales Variable costs Contribution margin Fixed costs Net operating income Sinks P450,000 (220,000) 230,000 (250,000) P(20,000) Bathtubs P520,000 (315,000) 205,000 (180,000) P25,000 Toilet Bowls P480,000 (280,000) 200,000 (140,000) P60,000 No, because dropping the sink segment will cause Carolina's total net operating income to decrease by P150,000. Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P150,000. Yes, because dropping the sink segment will cause Carolina's total net operating income to increase by P130,000. No, because dropping the sink segment will cause Carolina's…
Sanra company is considering eliminating its mountain bike division, which reported an operating loss for the recent year of 3,000. The division sales for the year were 1,050,000 and the variable costs were 860,000. The fixed costs of the division were 193,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be: a.57,900 decrease b.132,100 decrease c.54,900 decrease d.190,000 increase e.190,000 decrease
XYZ Company is facing changes in its cost structure so that fixed costs will decrease from $600,000 to $500,000, but variable costs will increase from $12 per unit to $14 per unit. If it were to implement these changes at its current production level of 50,000 units (with no change to selling price), profit would not change. What would happen to the company's profit if the changes were implemented, and production decreased to 45,000 units? O a. It will stay the same. O b. It will decrease. O c. none of the given answers O d. It will increase.
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Jake Company has three product lines, one of which has the following results: Sales P215,000 Variable expenses 125,000 Contribution margin 90,000 Fixed expenses 130,000 Net loss P (40,000) If this product line is eliminated, 60% of the fixed expenses will be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, how much will the company's net income or loss be?
Eaton Tool Company has fixed costs of $435,600, sells its units for $94, and has variable costs of $50 per unit. a. Compute the break-even point. Break-even point b. Ms. Eaton comes up with a new plan to cut fixed costs to $340,000. However, more labor will now be required, which will increas variable costs per unit to $53. The sales price will remain at $94. What is the new break-even point? Note: Round your answer to the nearest whole number. New break-even point units Profitability will be less Profitability will be more units c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
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Yeye co. is considering dropping a product. Variable cost is P60.00 per unit. Fixed overhead costs, exclusive of depreciation, have been allocated at a rate of P3.50 per unit and will continue whether or not production ceases. Depreciation on the equipment is P60,000 a year. If production is stopped, the equipment can be sold for P300,000, if production continues, however, it will be useless at the end of 1 year and will have no salvage value. The selling price is P100 a unit. Ignoring taxes, the minimum number of units to be sold in the current year to break even on a cash flow basis is
The B Co. is expecting an increase in fixed costs by P78,750 upon moving their place of business to the downtown area. Likewise it is anticipating that the selling price per unit and the variable expenses will not change. At present, the sales volume necessary to breakeven is P750,000 but the expected increase in fixed costs, the sales volume necessary to breakeven will go up to P975,000. Based on these predictions, what would be the required peso sales to earn P35,000 in the coming year? A.P1,175,000 B.P950,000 C.P425,000 D.P1,075,000
The NUBD Co. is expecting an increase in fixed costs by P78,750 upon moving their place of business to the downtown area. Likewise it is anticipating that the selling price per unit and the variable expenses will not change. At present, the sales volume necessary to breakeven is P750,000 but the expected increase in fixed costs, the sales volume necessary to breakeven will go up to P975,000. Based on these predictions, what would be the required peso sales to earn P35,000 in the coming year? A. P1,175,000 B. P950,000 C. P425,000 D. P1,075,000

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