Al Madinah Tire Company is considering the following alternatives: Alternative 1 Alternative 2 Revenues OMR 120,000 OMR 115,000 Shipping costs 60,000 70,000 Repair costs 45,000 25,000 When looking at Revenues, choosing Alternative 2 will affect net income by a: Select one: O a. 5,000 increase O b. None of the answers are correct O c. 10,000 decrease O d. 5,000 decrease e. 15,000 decrease

Al Madinah Tire Company is considering the following alternatives: Alternative 1 Alternative 2 Revenues OMR 120,000 OMR 115,000 Shipping costs 60,000 70,000 Repair costs 45,000 25,000 When looking at Revenues, choosing Alternative 2 will affect net income by a: Select one: O a. 5,000 increase O b. None of the answers are correct O c. 10,000 decrease O d. 5,000 decrease e. 15,000 decrease

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 12MC: Youngstown Construction plans to discontinue its rooting segment. Last year, this segment generated...

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Youngstown Construction plans to discontinue its rooting segment. Last year, this segment generated a contribution margin of $65.000 and incurred $70.000 in fixed costs. Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is expected to occur to the companys overall profit? A. a decrease of $5,000 B. a decrease of $30,000 C. a decrease of $5,000 D. an increase of $30,000
Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company Bs fixed costs are $375,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why.
Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by 300,000. b. Overall operating income will increase by 2,600. c. Overall operating income will decrease by 25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by 27,600.
Wisconsin Snowmobile Corp. is considering a switch to level production. Cost efficiencies would occur under level production, and aftertax costs would decline by $31,500, but inventory would increase by $350,000. Wisconsin Snowmobile would have to finance the extra inventory at a cost of 10.0 percent. a-1. Determine the extra cost or savings of switching over to level production. Loss or Gain and how much? __________ a-2. Should the company go ahead and switch to level production? multiple choice Yes No b. How low would interest rates need to fall before level production would be feasible?
Eva Freight Forwarding Company has estimated the following amounts for its next year: Total fixed expenses TL 832,500Sale price per unit 40Variable expenses per unit 25 How much the breakeven point (in units) CHANGE if Eva can move all its offices to cheaper areas to reduce (lower) fixed expenses by TL 22,500?
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Olinde Electronics Inc. producesstereo components that sell at P= $100 per unit. Olinde’s fixed costs are $200,000, variable costs are $50 per unit, 5,000 components are produced and sold each year, EBIT is currently $50,000, and Olinde’s assets (all equity-financed) are $500,000. Olinde can change itsproduction process by adding $400,000 to assets and $50,000 to fixed operating costs. Thischange would (1) reduce variable costs per unit by $10 and (2) increase output by 2,000units, but (3) the sales price on all units would have to be lowered to $95 to permit sales ofthe additional output. Olinde has tax loss carry-forwards that cause its tax rate to be zero,it uses no debt, and its average cost of capital is 10%.a. Should Olinde make the change? Why or why not?b. Would Olinde’s break-even point increase or decrease if it made the change?c. Suppose Olinde was unable to raise additional equity financing and had to borrow the$400,000 at an interest rate of 10% to make the investment. Use…
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Consider the following cost and pricing data of ABC Corp. on its Product X:Price: P120.00.per unitProfit Contribution: P90.00Proposed additional Cost: P3 per unit (for quality improvement)Current Profits: P2.4 millionSales: 100,000 units. A. Assuming that average variable costs are constant at all output levels, findABC Corp.’s total cost function before the proposed change.B. Calculate the total cost function if the quality improvement is implemented. UNANSWERED SUB-PARTSC. Calculate ABC Corp.’s break-even output before and after the change, assuming it cannot increase its price.D. Calculate the increase in sales that would be necessary with the quality improvement to increase profits to P2.7 million
ABC Co. plans to discontinue a department that has a contribution margin of P60,000 and P100,000 in fixed costs. Of the fixed costs, P60,000 would still continue even if the department is closed. The effect of this discontinuance on Indian’s overall net operating income would be A. Zero effect B. increase of P20,000 C. decrease of P20,000 D. increase of P40,000 Answer with explanation please. Thank you