Mario Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost? A. $19,000 B. $15,000 C. $35,000 D. $39,000

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Answer 1

Textbook Question

Chapter 12, Problem 1SEQ

Mario Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost?
A. $19,000
B. $15,000
C. $35,000
D. $39,000

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

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Students have asked these similar questions

Cesar Company has three product lines: A, B and C. The information given below is available. Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without ?increasing fixed costs. What will happen to operating income Product B Product C Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A $100,000 76,000 24,000 9,000 6,000 $9.000 $90,000 48,000 42,000 18,000 9,000 $15.000 $44,000 35,000 9,000 3,000 7,700 S(1,700) increase by $42,000 O increase by $18,000 increase by $36,000 increase by $15,000 ) increase by $24,000

Cesar Company has three product lines: A, B and C. The information given below is available. Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without ?increasing fixed costs. What will happen to operating income Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A S100,000 76,000 24,000 9,000 6.000 $9.000 Product B $90,000 48,000 42,000 18,000 9,000 $15.000 Product C $44,000 35,000 9,000 3,000 7.700 S(1,700) increase by $18,000 O increase by ST15,000 () increase by $36,000 increase by $24,000 increase by $42,000 )

Cesar Company has three product lines: A, B and C. The information given below is available. Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without ?increasing fixed costs. What will happen to operating income Product C Product A $100,000 76,000 24,000 9,000 6,000 $9.000 Product B $90,000 48,000 42,000 18,000 9,000 $15.000 $44,000 35,000 9,000 3,000 7,700 S(1.700) Sales Variable costs Contribution margin Avoidable fixed costs Unavoidable fixed costs Operating income(loss) increase by $18,000 increase by $15,000 increase by $36,000 increase by $24,000 increase by $42,000 O O O O O

Answer 2

Textbook Question

Chapter 12, Problem 1SEQ

Mario Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost?
A. $19,000
B. $15,000
C. $35,000
D. $39,000

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 12, Problem 1SEQ

Mario Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost?
A. $19,000
B. $15,000
C. $35,000
D. $39,000

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

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Answer 4

Textbook Question

Chapter 12, Problem 1SEQ

Mario Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost?
A. $19,000
B. $15,000
C. $35,000
D. $39,000

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

Answer 8

Expert Solution & Answer

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows:

Out-of-pocket costs
Opportunity costs

To Calculate:

The Differential Cost

Answer to Problem 1SEQ

The Differential Cost is $19,000

Explanation of Solution

The Differential Cost is calculated as follows:

Variable Product costs $15,000

Variable operating expenses $4,000

Total Differential cost = $19,000

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Concept Introduction:

Decision making plays an important role in the management. The decisions taken by managers are called managerial decisions. Managerial Decisions are decisions taken by managers for the operations of a firm. These decisions include setting target growth rates, hiring or firing employees, and deciding what products to sell. Manager's decisions are taken on the basis of quantitative as well as the qualitative measures. The managerial decision includes the decisions like make or buy, accept or reject new offers, sell or further process etc. These decisions are taken on the basis of relevant costs.

Relevant costs are the costs that are relevant for any decision making. Relevant costs are helpful for take managerial decisions like make or buy, accept or reject new offers, sell or further process etc.

Two basic types of the relevant costs are as follows: