The airline is presently offering its passengers to join a club that entitles them to use the club facilities. The controller ascertained that all variable costs could be avoided if the club operations will be eliminated, including some fixed costs: Supervisor's salaries Airport fees Depreciation on equipment P40,000 10,000 20,000 The club's income statement reported a net loss as shown below: Sales P400,000 Variable Costs: Direct materials P140,000 80,000 Direct labor Manufacturing overhead Contribution margin Fixed Costs: 50,000 270,000 P130,000 Depreciation on equipment Supervisor's salaries Insurance Airport Fees P60,000 40,000 20,000 10,000 20,000 General overhead allocated 150,000 Net Income P20,000 5. Determine the direct contribution margin. 6. Should the club be continued or eliminated?

The airline is presently offering its passengers to join a club that entitles them to use the club facilities. The controller ascertained that all variable costs could be avoided if the club operations will be eliminated, including some fixed costs: Supervisor's salaries Airport fees Depreciation on equipment P40,000 10,000 20,000 The club's income statement reported a net loss as shown below: Sales P400,000 Variable Costs: Direct materials P140,000 80,000 Direct labor Manufacturing overhead Contribution margin Fixed Costs: 50,000 270,000 P130,000 Depreciation on equipment Supervisor's salaries Insurance Airport Fees P60,000 40,000 20,000 10,000 20,000 General overhead allocated 150,000 Net Income P20,000 5. Determine the direct contribution margin. 6. Should the club be continued or eliminated?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 5CE: Verde Company reported operating costs of 50,000,000 as of December 31, 20x5, with the following...

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