Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Total Units Regular Super 13,000 3,900 $338,000 $819,000 260,000 468,000 Sales revenue 16,900 $1,157,000 728,000 Less: Cost of goods sold Gross Margin $ 78,000 $351,000 $ 429,000 78,000 280,000 Less: Selling expenses Operating income (loss). 358,000 71,000 $ 0 $ 71,000 $ Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $30 per unit for Super. Variable selling expenses are $4 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued? Multiple Choice $0. $15,600 Increase. $26.000 Increase. $49.400 decrease. None of the answers is correct.

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Total Units Regular Super 13,000 3,900 $338,000 $819,000 260,000 468,000 Sales revenue 16,900 $1,157,000 728,000 Less: Cost of goods sold Gross Margin $ 78,000 $351,000 $ 429,000 78,000 280,000 Less: Selling expenses Operating income (loss). 358,000 71,000 $ 0 $ 71,000 $ Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $30 per unit for Super. Variable selling expenses are $4 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued? Multiple Choice $0. $15,600 Increase. $26.000 Increase. $49.400 decrease. None of the answers is correct.

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 12.16E: Product cost concept of product pricing Based on the data presented in Exercise 12-15, assume that...

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