Sammy Company is considering eliminating its Commerclal division. The company allocates fixed costs based on division sales. If the Commercial diviesion is dropped, of ts vanatecosts are avoidable, and $101,00 0 of its fixed costs are avoldable. The impact on Sammy's operating Income from eliminating the commercial division would beGardenSalesFarmCommercial$ 680,000$ 923,000$ 695,000Variable costsContribution margin373,900415,000650,800306,100508,00044,200Fixed costs248,200336,500253,500Netincome (loss)57,900171,500(209,300)Multiple Choice$56,800 decrease$13,000 increase$39,000 increase$7,300 decrease25 650,800100508,00044,200253,500248,200income(loss)336,50046:2057,900171,500(209,300)Multiple Cholce$56,800 decrease$13,000 increase$39,000 increase$7,300 decrease$56,800 increase

Loss of contribution margin = $44,200 Fixed cost saved = $101,000

Sammy Company is considering eliminating Its Commercial division. The company allocates fixed costs based on division sales. If the Commercial divsion is dropped, costs are avoidable, and $101,00 0 of its fixed costs are avoidable. The impact on Sammy's operating Income from eliminating the commercial divison would be Sales Garden Farm Commercial $ 680,000 373,900 $ 923,000 $ 695,000 Variable costs 415,000 650,800 Contribution margin Fixed costs 306,100 248,200 508,000 44,200 336,500 253,500 Net income (loss) 57,900 171,500 (209,300) Multiple Choice $56,800 decrease $13,000 increase $39,000 increase $7,300 decrease

Sammy Company is considering eliminating Its Commercial division. The company allocates fixed costs based on division sales. If the Commercial divsion is dropped, costs are avoidable, and $101,00 0 of its fixed costs are avoidable. The impact on Sammy's operating Income from eliminating the commercial divison would be Sales Garden Farm Commercial $ 680,000 373,900 $ 923,000 $ 695,000 Variable costs 415,000 650,800 Contribution margin Fixed costs 306,100 248,200 508,000 44,200 336,500 253,500 Net income (loss) 57,900 171,500 (209,300) Multiple Choice $56,800 decrease $13,000 increase $39,000 increase $7,300 decrease

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...

See similar textbooks

Similar questions

Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?
Garrett Company provided the following information: Common fixed cost totaled 46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increase by 300,000. b. Overall operating income will increase by 2,600. c. Overall operating income will decrease by 25,000. d. Overall operating income will not change. e. Common fixed cost will decrease by 27,600.
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
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
Sammy Company is considering eliminating its commercial division. The company allocates fixed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy’s operating income from eliminating the commercial division would be: Garden Farm Commercial Sales $ 678,000 $ 920,000 $ 692,000 Variable costs 372,900 414,000 649,800 Contribution margin 305,100 506,000 42,200 Fixed costs 247,200 335,500 252,400 Net income (loss) 57,900 170,500 (210,200 )
Granfield company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42700. The division sales for the year were $973300 and the variable costs were $482000. The fixed costs of the division were $534000. If the backpack division dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on granfield operating income for eliminating this business segment would be?
Soar Incorporated is considering eliminating its mountain bike division, which reported a loss for the recent year of $4,000 as shown below. Segment Income (Loss) Sales $ 1,075,000 Variable costs 870,000 Contribution margin 205,000 Fixed costs 209,000 Income (loss) $ (4,000) If the mountain bike division is dropped, all $870,000 of its variable costs are avoidable, and $62,700 of its fixed costs are avoidable. The impact on income for eliminating this business segment would be:
ABC Company is considering eliminating its parts division as a result of its current operating performance: Sales = $40,000; Variable expenses = $20,000; Contribution margin = $20,000; Fixed expenses = $23,000; Operating income = $(3,000). ABC determines that $15,000 of the $23,000 fixed expenses are direct fixed expenses to the parts division. If ABC Company eliminates the parts division, ABC's total operating income wil
The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East Week Sales 575000$ 490500$ Variable costs 188000$ 259500$ Traceable fixed costs 172500$ 195400$ Allocated common corporate costs 122900$ 142100$ Net operating income ( loss ) 91600$ (106500$) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of:
The X and Y Divisions are divisions in the same company. Currently the Y Division buys a part from X Division for P390 per unit. The X Division wants to increase the price of the part it sells to Y Division by P60 to P450. The manager of the Y Division has stated that he cannot pay that much insofar as the division's profit goes below zero. The manager of the Y Division can buy the part from an outside supplier for P448 per unit. The cost data pertaining to the part is supplied by the X Division: Direct materials P136.00 Direct labor 200.00 Variable overhead 40.00 Fixed overhead 38.40 A. If X Division does not produce the parts for the Y Division, it will be able to avoid one-third of the fixed manufacturing overhead costs. The X Division has excess capacity but no alternative uses for the facilities. Y Division will sell the finished product with the part (from X Division) for P1,000 after incurring additional processing costs of P600. What is the…
Windsor Company has two divisions - Alpha and Beta. The divisions have the following revenues and expenses: Alpha Beta Sales $550,000 $500,000 Variable costs 275,000 200,000 Direct fixed costs 180,000 150,000 Allocated corporate costs 170,000 135,000 Net income (loss) ($75,000) $15,000 The management of Windsor is considering the elimination of the Alpha Division. If the Alpha Division were eliminated, the direct fixed costs associated with this division could be avoided. However, corporate costs would still be $305,000 in total. Given these data, the elimination of the Alpha Division would result in an overall company net income (loss) of: Multiple Choice ($75,000). ($60,000). ($155,000). $15,000.
The Furniture Company currently has three divisions: Maple, Oak, and Cherry. The oak furniture line does not seem to be doing well and the president of the company is considering dropping this line. If it is dropped, the revenues associated with the Oak Division will be lost and the related variable costs saved. Also, all of the fixed costs presented under the oak furniture line would be eliminated. The income statements, by divisions, are as follows. Maple Oak CherrySales P55,000 P85,000 P100,000Variable Costs 40,000 72,000 82,000Contribution Margin 15,000 13,000 18,000Fixed costs 10,000 14,000 10,200Oper. profit(loss) P 5,000 P(1,000) P 7,800Which one of the following options should be recommended to the president of the company? Answers: a. Continue operating the Oak Division as discontinuance would result in…