Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: P400 Selling price per membership Variable costs per membership Contribution margin 270 130 Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P150,000 70,000 25,000 50,000 If they continue operating, the company will demand for the club is 4,000 memberships. forced to reduce membership selling price by 12.50%. The

Due to heavy rains brought by La Niña, the management of the company is contemplating to close club operations of the airline temporarily. The expected demand for the club was reduced, which is expected to last for four (4) months. Assume the typical monthly operating revenues and costs of the club operations: P400 Selling price per membership Variable costs per membership Contribution margin 270 130 Fixed costs per month Fixed costs avoided if stop operations Additional costs during the shutdown period for four (4) months Estimated restarting costs P150,000 70,000 25,000 50,000 If they continue operating, the company will demand for the club is 4,000 memberships. forced to reduce membership selling price by 12.50%. The

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 35P: Oberweis Dairy switched from delivery trucks with regular gasoline engines to ones with diesel...

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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
Oberweis Dairy switched from delivery trucks with regular gasoline engines to ones with diesel engines. The diesel trucks cost $6,000 more than the ordinary gasoline trucks but costs $1,800 per year less to operate. Assume that Oberweis saves the operating costs at the end of each month. If Oberweis uses a discount rate of 1% per month, approximately how many months, at a minimum, must the diesel trucks remain in service for the switch to be sensible?
Paul Company is contemplating to close the operations of the club Due to heavy rains brought by La Niña, the expected demand of the club was reduced, which is expected to last for six (6) months. Assume the typical monthly operating revenues and costs of the club operations of Paul Company: Selling price per membership P400 Variable costs per membership 270 Contribution margin 130 Fixed costs per month P150,000 Fixed costs avoided if stop operations 70,000 Additional costs during the shutdown period for six (6) months 40,000 Estimated restarting costs 100,000 If it continues operating, the company will be forced to reduce the membership selling price by 12.50%. Determine the shutdown Determine the shutdown Determine the shutdown If the demand of the club is 3,600 memberships, should the company shut down or continue operations? Justify your answer.
Dropping or Retaining a Flight Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a “high-risk” area. The remaining two-thirds would be unaffected by a decision to drop flight 482. c. The baggage loading and flight preparation expense is an allocation of ground crews’ salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on…
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Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (195 seats × 40% occupancy × $200 ticket price) $ 15,600 100.0 % Variable expenses ($20.00 per person) 1,560 10 Contribution margin 14,040 90 % Flight expenses: Salaries, flight crew $ 1,800 Flight promotion 770 Depreciation of aircraft 1,550 Fuel for aircraft 5,800 Liability insurance 5,100 Salaries, flight assistants 1,300 Baggage loading and flight preparation 1,850 Overnight costs for flight crew and assistants at destination 600 Total flight expenses 18,770 Net operating loss $ (4,730 ) The…
Trebecker Construction plans to discontinue its roofing segment which last year generated a contribution margin of $65,000 and incurred $90,000 in fixed costs. If the segment is discontinued, half of the fixed costs will be avoided. What effect is expected to occur to the company’s overall profit? A decrease of $20,000 A decrease of $15,000 An increase of $15,000 An increase of $20,000 An increase of $30,000
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Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, the company is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats × 40% occupancy × $240 ticket price) $ 16,800 100.0 % Variable expenses ($18.00 per person) 1,260 7.5 Contribution margin 15,540 92.5 % Flight expenses: Salaries, flight crew $ 2,000 Flight promotion 790 Depreciation of aircraft 1,700 Fuel for aircraft 5,500 Liability insurance 5,100 Salaries, flight assistants 1,300 Baggage loading and flight preparation 1,950 Overnight costs for flight crew and assistants at destination 500 Total flight expenses 18,840 Net operating loss $ (3,300 ) The…
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