Answered: How do I determine if the standard…

Business

Accounting

How do I determine if the standard coffee line should be continued or discontinued?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 1SEQ: Mario Company is considering discontinuing a product. The costs of the product consist of $20,000...

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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. $39,000
Lambert, Inc. manufactures several types of accessories. For the year, the knit hats and scarves line had sales of $400,000, variable expenses of $310,000, and fixed expenses of $120,000. Therefore, the knit hats and scarves line had a net loss of $30,000. If Lambert eliminates the knit hats and scarves line, $20,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the knit hats and scarves line.
Product AG52 has revenue of $748,000, variable cost of goods sold of $640,000, variableselling expenses of $90,000, and fixed costs of $50,000, creating a loss from operations of$32,000. Prepare a differential analysis as of October 7 to determine if Product AG52 should becontinued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffectedby the decision
The management of M Corporation has been concerned for some time with the financial performance of its product I54J and has considered discontinuing it on several occasions. Data from the company's accounting system appear below: Sales $ 650,000 Variable Expenses $ 293,000 Fixed manufacturing expense $ 221,000 Fixed selling and administrative expense $ 150,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $95,000 of the fixed manufacturing expenses and $85,000 of the fixed selling and administrative expenses are avoidable if product I54J is discontinued. According to the company's accounting system, what is the net operating income earned by product I54J? A. $14,000 B. ($357,000) C. ($14,000) D. $357,000
Fine Leather Enterprises sells its single product for $129.00 per unit. The firm’s fixed operating costs are $473,000 annually, and its variable operating costs are $86.00 per unit. Find the firm’s operating breakeven point in units. Label the x-axis “Sales (units)” and the y-axis “Costs/Revenues ($)”, and then graph the firm’s sale revenue, total operating cost, and fixed operating cost functions on these axes. In addition, label the operating breakeven point and the areas of loss of profit (EBIT).
Suppose Grainy Day is considering discontinuing its tasty loops product line. Assume that during the past year, the tasty loops' product line income statement showed the following: A B 1 Sales revenue $7,550,000 2 Less: Cost of goods sold 6,400,000 3 Gross profit 1,150,000 4 Less: Operating expenses 1,650,000 5 Operating income (loss) $(500,000) Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the tasty loops line is just one of the company's cereal operations, only $780,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Grainy Day discontinue the tasty loops product line?
The RV company, engaged in the fabrication of automobile engine part withproduction capacity of 700,000 units per year, is only operating at 65% capacity due to unavailability of the necessary foreign currency to finance the importation of their raw materials. The current annual income is P450,000; annual fixed costs are P190,000 and variable cost are P0.35 per unit. A) What is the current profit/loss? B) What is the breakeven point in units and in pesos? C) Draw the breakeven chart.
A company has five product lines, one of which has Fixed expenses of $173,657 and a Net loss of $40,203. If this product line is eliminated, 48% of the fixed expenses can be eliminated and the remainder will be allocated to other product lines. If management decides to eliminate this product line, the amount the company's net income will increase or decrease(-) is? Round to the nearest dollar and put a negative sign - before a decrease. Do not type the dollar sign.
Midlands Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expenses $2,235,000; and net loss $235,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,568,000 $1,050,000 $518,000 Selling expenses 517,000 92,000 425,000 Administrative expenses 150,000 58,000 92,000 $2,235,000 $1,200,000 $1,035,000 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50
Product T has revenue of $193,800, variable cost of goods sold of $113,400, variable selling expenses of $32,000, and fixed costs of $60,500, creating a loss from operations of $12,100. Prepare a differential analysis as of May 9, to determine whether Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2) May 9 Continue ProductT (Alternative 1) Discontinue ProductT (Alternative 2) Differential Effecton Income(Alternative 2) Revenues $fill in the blank f95665055014074_1 $fill in the blank f95665055014074_2 $fill in the blank f95665055014074_3 Costs: Variable cost of goods sold fill in the blank f95665055014074_4 fill in the blank f95665055014074_5 fill in the blank…
The Mansfield Company manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below: Pro Novice Sales $900,000 $240,000 Less cost of goods sold: Unit-level production cost 600,000 135,000 Depreciation, production equipment 125,000 50,000 Gross margin $175,000 $55,000 Less operating expenses: Unit-level selling and administrative costs 40,000 65,000 Corporate-level facility expenses (fixed) 36,000 36,000 Net income (loss) $99,000 $46,000 Based on the information given, should the company keep or eliminate the Novice line? IF kept how much does it contribute in total profitability?
The condensed income statement of Hayden Corp. for the past year is as follows: Product T U Sales $680,000 $320,000 Costs: Variable costs $540,000 $220,000 Fixed costs 145,000 40,000 Total costs $685,000 $260,000 Income (loss) $ (5,000) $ 60,000 Management is considering the discontinuance of the manufacture and sale of Product T at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product U. What is the amount of change in net income for the current year that will result from the discontinuance of Product T? a.$140,000 increase b.$140,000 decrease c.$5,000 increase d.$5,000 decrease