Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Units Regular 10,000 Super 3,700 Sales revenue Less: Cost of goods sold $ 240,000 $ 740,000 180,000 Total 13,700 $ 980,000 Gross Margin $ 60,000 Less: Selling expenses Operating income (loss) 60,000 $ 0 481,000 $ 259,000 134,000 661,000 $ 319,000 194,000 $ 125,000 $ 125,000 Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 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 О О $0 $10,400 increase
Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Units Regular 10,000 Super 3,700 Sales revenue Less: Cost of goods sold $ 240,000 $ 740,000 180,000 Total 13,700 $ 980,000 Gross Margin $ 60,000 Less: Selling expenses Operating income (loss) 60,000 $ 0 481,000 $ 259,000 134,000 661,000 $ 319,000 194,000 $ 125,000 $ 125,000 Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $20 per unit for Super. Variable selling expenses are $4 per unit for Regular and $20 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 О О $0 $10,400 increase
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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