Accouting Motion Rollerblades has three product lines-D, E, and F. The following information is available:DE$60,000$90,000(40,000)(5,000)$50,000$55,000(15,000)$40,000Sales revenueVariable costsContribution marginFixed costsOperating income (loss)O A. Operating income will increase $6,000.B. Operating income will increase $18,000.(15,000)$35,000C. Operating income will increase $24,000.OD. Operating income will decrease $18,000.F$30,000(12,000)$18,000The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Motiondrops product line F and does not replace it, what effect will this have on operating income?(24,000)$(6,000)

The net income is calculated as the difference between revenue and expenses. The dropping of a…

Motion Rollerblades has three product lines-D, E, and F. The following information is available: E $60,000 (5,000) $55,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) $90,000 (40,000) $50,000 OA. Operating income will increase $6,000. OB. Operating income will increase $18,000. OC. Operating income will increase $24,000. OD. Operating income will decrease $18,000. (15,000) $35,000 (15,000) $40,000 F $30,000 (12,000) $18,000 (24,000) $(6,000) The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Motion drops product line F and does not replace it, what effect will this have on operating income?

Motion Rollerblades has three product lines-D, E, and F. The following information is available: E $60,000 (5,000) $55,000 Sales revenue Variable costs Contribution margin Fixed costs Operating income (loss) $90,000 (40,000) $50,000 OA. Operating income will increase $6,000. OB. Operating income will increase $18,000. OC. Operating income will increase $24,000. OD. Operating income will decrease $18,000. (15,000) $35,000 (15,000) $40,000 F $30,000 (12,000) $18,000 (24,000) $(6,000) The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if Motion drops product line F and does not replace it, what effect will this have on operating income?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 11MCQ: Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett...

See similar textbooks

Similar questions

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
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.
Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000, operating expenses of $30,000, and invested assets of $600000. What is the return on investment for Division A? A. 20% B. 25% C. 33% D. 40%
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
Starling Co. manufactures one product with a selling price of 18 and variable cost of 12. Starlings total annual fixed costs are 38,400. If operating income last year was 28,800, what was the number of units Starling sold? a. 4,800 b. 6,400 c. 5,600 d. 11,200
Olivian Company wants to earn 420,000 in net (after-tax) income next year. Its product is priced at 275 per unit. Product costs include: Variable selling expense is 14 per unit; fixed selling and administrative expense totals 290,000. Olivian has a tax rate of 40 percent. Required: 1. Calculate the before-tax profit needed to achieve an after-tax target of 420,000. 2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. (Round to the nearest unit.) 3. Prepare an income statement for Olivian Company for the coming year based on the number of units computed in Requirement 2. 4. What if Olivian had a 35 percent tax rate? Would the units sold to reach a 420,000 target net income be higher or lower than the units calculated in Requirement 3? Calculate the number of units needed at the new tax rate. (Round dollar amounts to the nearest dollar and unit amounts to the nearest unit.)
Total costs for ABC Distributing are $250,000 when the activity level is 10,000 units. If variable costs are $5 per unit, what are their fixed costs? $240,000 $200,000 $260,000 Their fixed costs cannot be determined from the information presented.
Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of 5,000,000, fixed manufacturing costs of 2,000,000, variable marketing costs of 1,000,000, and fixed marketing costs of 3,000,000. Under the variable costing concept, the inventory value of the new product would be: a. 5,000,000. b. 6,000,000. c. 8,000,000. d. 11,000,000.
Diamond Company has three product lines, A, B, and C. The following financial information is available: Item Product Line A Product Line B Product Line C Sales $ 52,000 $ 100,000 $ 23,000 Variable costs $ 31,200 $ 53,000 $ 14,375 Contribution margin $ 20,800 $ 47,000 $ 8,625 Fixed costs: Avoidable $ 5,400 $ 14,500 $ 6,300 Unavoidable $ 4,100 $ 10,000 $ 3,100 Pre-tax operating income $ 11,300 $ 22,500 $ (-775 ) Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, pre-tax operating income for the firm will likely: Multiple Choice Be unchanged Increase by $2,025 Increase by $2,325 Decrease by $2,325 Decrease by $4,350
Rings Company has three product lines, A, B, and C. The following financial information is available: Item Product Line A Product Line B Product Line C Sales $ 66,000 $ 135,000 $ 30,000 Variable costs $ 39,600 $ 72,000 $ 18,750 Contribution margin $ 26,400 $ 63,000 $ 11,250 Fixed costs: Avoidable $ 6,100 $ 18,000 $ 8,400 Unavoidable $ 4,800 $ 13,500 $ 3,800 Pre-tax operating income $ 15,500 $ 31,500 $ (950) If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely: Multiple Choice Be unchanged—the two effects cancel each other out. Increase by $1,950. Increase by $3,150. Increase by $5,850. Increase by some other amount.
Patricia Company earned P 40,000 on sales of P 400,000. It earned P 55,000 on sales of P 450,000. total fixed costs are _____________ and why? a. P 210,000 b. P 360,000 c. P 0 d. P 80,000
Agta Enterprises manufactures a product that sells for R180 each. The company presently produces and sells 50 000 units per year. Unit variable manufacturing and selling expenses are R90 and R18 respectively. Annual fixed costs are R2 200 000 for manufacturing overheads and R1 040 000 for selling and administrative activities. Determine the sales quantity required in order to achieve the company’s profit objective of R1 800 000.