Iakisthike, LLC has two lines of products, Regular and Super, and is thinking about discontinuing the weaker Regular line. If the regular line is dropped, company-wide fixed manufacturing costs would fall by 7%. The following table displays information regarding operations from the most recent year: RegularSuperTotalUnits7,0003,00010,000Sales$210,000$750,000$960,000Less: Cost of Goods Sold$140,000$375,000$515,000Gross Margin$70,000$375,000$445,000Less: Selling Expenses$70,000$135,000$205,000Operating Income$0$240,000$240,000Variable manufacturing costs included in cost of goods sold amount to $18 per unit for Regular and $109 per unit for Super; other manufacturing costs are fixed. Fixed selling expenses are $7 per unit for Regular and $22 per unit for Super; remaining selling expense amounts are variable. If the Regular line is discontinued, operating income would (increase, decrease, or no change) by $_____

Total fixed manufacturing cost = [$140,000 - (7,000 x $18)] + [$375,000 - (3,000 x $109)] = $62,000…

Answered: Iakisthike, LLC has two lines of…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 1PB: Variety Artisans has a bottleneck in their production that occurs within the engraving department....

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Iakisthike, LLC has two lines of products, Regular and Super, and is thinking about discontinuing the weaker Regular line. If the regular line is dropped, company-wide fixed manufacturing costs would fall by 7%. The following table displays information regarding operations from the most recent year:

	Regular	Super	Total
Units	7,000	3,000	10,000
Sales	$210,000	$750,000	$960,000
Less: Cost of Goods Sold	$140,000	$375,000	$515,000
Gross Margin	$70,000	$375,000	$445,000
Less: Selling Expenses	$70,000	$135,000	$205,000
Operating Income	$0	$240,000	$240,000

Variable manufacturing costs included in cost of goods sold amount to $18 per unit for Regular and $109 per unit for Super; other manufacturing costs are fixed. Fixed selling expenses are $7 per unit for Regular and $22 per unit for Super; remaining selling expense amounts are variable.

If the Regular line is discontinued, operating income would (increase, decrease, or no change) by $_____

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