Appel Inc. has two product lines: phones and laptops. They are considering dropping the phone segment to improve their net operating income. Data for each per unit is as follows: Revenue Variable Costs Traceable Fixed Costs Allocated Fixed Costs Total Per Unit Phones Laptops $530 $1099 $245 $430 $300 $209 $110 $130 $(125) $330 Assume no allocated fixed costs are avoidable if the phone segment is dropped, but 100% of
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- 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. $39,000Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?
- Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incremental fixed costs would be and how many radios must be sold to cover these costs. In response, Betty Johnson, the marketing manager, gathered data for the current products to help in projecting overhead costs for the new product. The overhead costs based on 30,000 direct labor hours follow. (The high-low method using direct labor hours as the independent variable was used to determine the fixed and variable costs.) All depreciation. The following activity data were also gathered: Betty was told that a plantwide overhead rate was used to assign overhead costs based on direct labor hours. She was also informed by engineering that if 20,000 radios were produced and sold (her projection based on her marketing study), they would have the same activity data as the recorders (use the same direct labor hours, machine hours, setups, and so on). Engineering also provided the following additional estimates for the proposed product line: Upon receiving these estimates, Betty did some quick calculations and became quite excited. With a selling price of 26 and just 18,000 of additional fixed costs, only 4,500 units had to be sold to break even. Since Betty was confident that 20,000 units could be sold, she was prepared to strongly recommend the new product line. Required: 1. Reproduce Bettys break-even calculation using conventional cost assignments. How much additional profit would be expected under this scenario, assuming that 20,000 radios are sold? 2. Use an activity-based costing approach, and calculate the break-even point and the incremental profit that would be earned on sales of 20,000 units. 3. Explain why the CVP analysis done in Requirement 2 is more accurate than the analysis done in Requirement 1. What recommendation would you make?Ram Co. is trying to decide whether or not to discontinue one of its products, slow cookers. Last year's sales and expenses for slow cookers are as follows: Sales $65,000 Less expenses: Variable costs $35,000 Fixed costs 48,000 83,000 Net operating loss $(18,000) If slow cookers are discontinued, 75% of the fixed costs can be avoided. At the same time, discontinuing slow cookers will have no effect on other products. What is the financial advantage or disadvantage of discontinuing slow cookers? Multiple Choice a)$17,000 financial advantage b)$13,000 financial disadvantage c)$4,000 financial disadvantage d)$6,000 financial advantageDue to erratic sales of its sole product, a high capacity battery for laptop computers, Salcedo Company has been experiencing difficulty for some time. The company's income statement for the most recent month is given below: Sales (19,500 units @ P500) P9,750,000 Less variable expenses (7,995,000) Contribution margin 1,755,000 Less fixed expenses 1,800,000 Net loss P (45,000) By automating certain operations, the company could reduce variable costs by P30 per unit. However, fixed costs would increase by P9600,000 each month. How would the breakeven point in units change if the company automated the operations?
- Coronado Machines has four product lines, one of which reflects the following results: Sales $210000 Variable costs 111000 Contribution margin 99000 Fixed costs 111000 Net loss $(12000) If this product line is eliminated, 40% of the fixed costs can be eliminated and the other 60% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income? It will increase by $12000. It will increase by $44400. It will decrease by $42600. It will decrease by $54600.Using your answer to Requirement 1, assume that Reshier Company is considering dropping any model with a negative product margin. What are the alternatives? Which alternative is more cost effective and by how much? (Assume that any traceable fixed costs can be avoided.) Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will add $fill in the blank 8723bbfe4004028_3 to operating income 3. What if Reshier Company can only avoid 182 hours of engineering time and 4,800 hours of setup time that are attributable to Model 1? How does that affect the alternatives presented in Requirement 2? Which alternative is more cost effective and by how much? Do NOT round interim calculations and, if required, round your answer to the nearest dollar. will add $fill in the blank 8723bbfe4004028_5 to operating incomeXYZ Company is facing changes in its cost structure so that fixed costs will increase from $400,000 to $500,000, but variable costs will decrease from $12 per unit to $10 per unitit were to implement these changes at its current production level of 50, 0 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? a- It will stay the same. b -It will increase . C-none of the given answers d -It will decrease .
- Vaughn Machines has four product lines, one of which reflects the following results: Sales $220000 Variable costs 117000 Contribution margin 103000 Fixed costs 117000 Net loss $(14000) If this product line is eliminated, 45% of the fixed costs can be eliminated and the other 55% will be allocated to other product lines. If management decides to eliminate this product line, what will happen to the company's net income? It will decrease by $36350. It will decrease by $50350. It will increase by $14000. It will increase by $52650.Pepper Industries has three product lines, A, B, and C. The following information is available: A B C Sales R60 000 R90 000 R24 000 Variable costs R36 000 R48 000 R15 000 Contribution margin R24 000 R42 000 R9 000 Fixed costs: Avoidable 9 000 18 000 6 000 Unavoidable 6 000 9 000 5 400 Operating income R9 000 R15 000 R(2 400) Pepper Industries is thinking of dropping product line C because it is reporting a loss. Assuming Pepper drops line C and does not replace it, the operating income will : decrease by R3 000 increase by R2 400 increase by R3 000 decrease by R5 400Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $342,500 of its fixed costs are avoidable. Segment Income (Loss) Sales $ 1,146,600 Variable costs 819,000 Contribution margin 327,600 Fixed costs 391,000 Income (loss) $ (63,400) (a) Compute the income increase or decrease from eliminating this segment.(b) Should the segment be continued or eliminated?