The management of NUBDCorporation is considering dropping product D4. Data from the company's accounting system appear below: Sales "Variable expenses Fixed manufacturing expenses. Fixed selling and administrative expenses. P830,000 P390,000 P266,000 P232,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that 50% of the fixed manufacturing expenses and P105,000 of the fixed selling and administrative expenses are avoidable if product D4 is discontinued.
Q: Company XYZ produced 1,000 units of product A. At this level, the variable manufacturing costs were…
A: Variable cost is a cost that changes with the change in the level of unit productions. Fixed cost is…
Q: A guitar manufacturer is considering eliminating its Electric Guitar division because its $76,000…
A: Total avoidable expense = Cost of goods sold + Direct expenses + Indirect expenses + Service…
Q: The following product line information is for the Swiss Watch Company. The company is considering…
A: Note: Operating income of the company will be decreased by the amount, contribution margin earned by…
Q: net operating income
A: Net operating income is the excess of operating revenues over operating expenses.
Q: NUBD Company is currently operating at a loss of P20,000. The sales manager has received a special…
A: Here in this question, we are required to determine how much price should be quoted for 5,000 Units.…
Q: 1. Prepare a differential analysis to show whether the corporation should drop the B product line.…
A: The income statement is defined as the financial statement that highlights the financial result of…
Q: NUBD Co. has been incurring losses in the past years during the third quarter of the year.…
A: SOLUTION- CONTINUED OPERATION ARE ACTIVITIES WITHIN A BUSINESS ORGANIZATION THAT ARE ONGOING AND…
Q: The management of Bonga Corporation is considering dropping product D74F. Data from the company's…
A: Calculation of Financial Advantage (Disadvantage) if Product D74 is dropped If Product D74…
Q: Cornell Enterprises currently produces several products. Model L78 is showing a net operating loss…
A: For deciding whether to continue or discontinue the production of Model L78, Cornell Enterprises…
Q: If Marigold accepts the offer, by how much will net income increase (decrease)?
A: Overheads: Overheads are the cost incurred by the organization which is not directly related to…
Q: Little Cory Corporation is considering dropping product G41O. Data from the company's accounting…
A: a. Particulars Amount Sales 450000 Variable expense -185000 Contribution margin 265000…
Q: Lyca Company is currently operating at a loss of P20,000. The sales manager has received a special…
A: In the given question, the company is current incurring a loss of P 20,000. The company wants its…
Q: The management of Furrow Corporation is considering dropping product LO7E. Data from the company's…
A: While making decision fixed costs are not relevant and should not be considered. Avoidable…
Q: The condensed income statement for Monroe Corp. for the past year is as follows: Product В C Sales…
A: If product B is discontinued then Total Fixed costs will be allocated to product "C" Because Fixed…
Q: ecision to Discontinue a Product On the basis of the following data, the general manager of…
A: The discontinuity of an activity is determined with the effect on profitability if activity is…
Q: Frazer Corp sells several products. Information of average revenue and costs is as follows: Selling…
A: Cost volume profit analysis is the technique used by the management for decision-making. The methods…
Q: 5,000. which normally sells for P35 per unit. Costs associated with the manager has received a…
A:
Q: The management of Furrow Corporation is considering dropping product LO7E. Data from the company's…
A: Sales 830,000 Less: Variable expense 365,000 Contribution margin 465,000 Less: Fixed…
Q: The management of Bonga Corporation is considering dropping product D74F. Data from the company's…
A: Working Note: Total fixed costs = Fixed manufacturing expenses + Fixed selling and administrative…
Q: The condensed income statement for a Hayden corp. For the past year…
A: Formula: Change in net income = Sales made by T - Variable cost of T
Q: of P184,000 and a total cost and expenses amounting to P211,600. Fixed costs amounted to P86,480,…
A: Revenue refers to the earned by an entity through its basic activities such as selling some goods or…
Q: arbardy Company is introducing a new product. The managers are trying to decide whether to ma- ne of…
A: The difference between making and buying depends on the cost incurred for production and purchase…
Q: The management of Bonga Corporation is considering dropping product D74F. Data from the company's…
A: When there is option to continue the production of the product or to drop the product, then net…
Q: The condensed income statement for a business for the past year is as follows:…
A: When a business decision to be made on discontinuance then have to consider the impact of…
Q: A guitar manufacturer is considering eliminating its electric guitar division because its $90,790…
A: To make a decision whether the guitar division should be eliminated or not, unavoidable expenses…
Q: Your Company is considering discontinuing a product. Data from the company's accounting system…
A: This question deals with the concept of decision making. Here in this question decision is about…
Q: The management of Bonga Corporation is considering dropping product D74F. Data from the company's…
A: Avoidable fixed expenses are those fixed expenses which can be avoided if a particular product or…
Q: NUBD Company is currently operating at a loss of P20,000. The sales manager has received a special…
A: In order to increase net income to $10,000, there must be an increase of P30,000 (P10,000 + P20,000)…
Q: A company has five product lines, one of which has Fixed expenses of $173,657 and a Net loss of…
A: Segment Reporting; When a company's operating segments are reported in the financial statements that…
Q: On the basis of the following data, the general manager of Hawkeye Shoes Inc. decided to discontinue…
A: Differential analysis: Differential analysis refers to the analysis of differential revenue that…
Q: The management of Bonga Corporation is considering dropping product D74F. Data from the company's…
A: Marginal Costing - Company identify operating profit or loss by reducing variable costs and Fixed…
Q: Vaughn Manufacturing incurs the following costs to produce 10,400 units of a subcomponent: Cost…
A: Solution Production- Direct material 8736 Direct labor 11752 Variable overhead 13104…
Q: . The relevant cost for IT Company to consider in making its decision is
A: For the purpose of decision making past costs i.e the cost which is already incurred is not…
Q: Mr. Ador Estoria, the operations manager of Achos Merchandising Corp. Is worried about the result of…
A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…
Q: A company has three product lines, one of which has the following results: Sales $214000 Variable…
A: Income statement shows the net income or net loss calculated by deducting the expenses from the…
Q: Armor Sports, Inc. has two product lines-batting helmets and football helmets. The income statement…
A: Formula used: Effect of dropping football helmets line on the operating income = Saving in fixed…
Q: Product U23N has been considered a drag on profits at Jinkerson Corporation for some time and…
A: Lets understand the basics. When there is option of whether continue to manufacture product or…
Q: Bell enterprises currently produces several products. Model L78 is showing a net operating loss as…
A: Net Operating Loss is when the cost of operations is more than the revenue generated from these…
Q: The income statement for Slumber Company is divided by its two product lines, blankets and pillows,…
A: We will need to calculate the if we discontinue to produce product "Pillow" then how much it will…
Q: The Colin Division of Sunland Company sells its product for $32 per unit. Variable costs per unit…
A: Computation of the net income under variable costing for each alternative is as follows:
Q: Members of the board of directors of Security One have received the following operating income data…
A: Under differential analysis, the unavoidable fixed cost shall be compared with the current operating…
Q: Garrett Company provided the following information: Common fixed cost totaled $46,000. Garrett…
A: There are mainly two type of costs being incurred in business. One is variable costs and other one…
Q: Product Sigma has revenue of $436,000, variable cost of goods sold of $320,000, variable selling…
A: Fixed cost does not change whether the Product Sigma continues or discontinues. Variable costs…
Q: Mr. Ador Estoria, the operations manager of Achos Merchandising Corp. Is worried about the result of…
A: The break-even point is the sales point where sales cover all the expenses related to the goods.
Q: Randall has received a special order for 4300 units of its product at a special price of $20. The…
A: Special orders are usually one-time and do not attract a fixed cost. So, if the firm has the…
Q: Mission Company has three product lines: D, E, and F. The following information is available:…
A: Operating income is the total income generated in the firm from operating activities. It is…
Q: Oriole Company incurs the following costs to produce 10200 units of a subcomponent: Direct…
A: The first step is to calculate the total relevant manufacturing cost. Fixed overhead costs are not…
What would be the effect on the company's overall net operating income if product D4 were dropped?
Step by step
Solved in 2 steps with 1 images
- 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.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.In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods. Don resolved to take measures to improve the overall quality of the companys products. After hiring a consultant in 20X1, the company began an aggressive program of total quality control. At the end of 20X5, Don requested an analysis of the progress the company had made in reducing and controlling quality costs. The accounting department assembled the following data: Required: 1. Compute the quality costs as a percentage of sales by category and in total for each year. 2. Prepare a multiple-year trend graph for quality costs, both by total costs and by category. Using the graph, assess the progress made in reducing and controlling quality costs. Does the graph provide evidence that quality has improved? Explain. 3. Using the 20X1 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 20X4. By how much did profits increase in 20X4 because of the quality improvement program? Repeat for 20X5.
- Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?
- Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = 30,000 and T = 0.28 inches in diameter. A sample of four units produced the following values: Required: 1. Calculate the average loss per unit. 2. Assuming that 100,000 units were produced, what is the total hidden cost? 3. Assume that the multiplier for Stahmans hidden external failure costs is six. What are the measured external costs? Explain the difference between measured costs and hidden costs.At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income statement for 20x1. In response, the controller provided the following statement: After some investigation, Maria soon realized that the products being produced had a serious problem with quality. She once again requested a special study by the controllers office to supply a report on the level of quality costs. By the middle of November, Maria received the following report from the controller: Maria was surprised at the level of quality costs. They represented 30 percent of sales, which was certainly excessive. She knew that the division had to produce high-quality products to survive. The number of defective units produced needed to be reduced dramatically. Thus, Maria decided to pursue a quality-driven turnaround strategy. Revenue growth and cost reduction could both be achieved if quality could be improved. By growing revenues and decreasing costs, profitability could be increased. After meeting with the managers of production, marketing, purchasing, and human resources, Maria made the following decisions, effective immediately (end of November 20x1): a. More will be invested in employee training. Workers will be trained to detect quality problems and empowered to make improvements. Workers will be allowed a bonus of 10 percent of any cost savings produced by their suggested improvements. b. Two design engineers will be hired immediately, with expectations of hiring one or two more within a year. These engineers will be in charge of redesigning processes and products with the objective of improving quality. They will also be given the responsibility of working with selected suppliers to help improve the quality of their products and processes. Design engineers were considered a strategic necessity. c. Implement a new process: evaluation and selection of suppliers. This new process has the objective of selecting a group of suppliers that are willing and capable of providing nondefective components. d. Effective immediately, the division will begin inspecting purchased components. According to production, many of the quality problems are caused by defective components purchased from outside suppliers. Incoming inspection is viewed as a transitional activity. Once the division has developed a group of suppliers capable of delivering nondefective components, this activity will be eliminated. e. Within three years, the goal is to produce products with a defect rate less than 0.10 percent. By reducing the defect rate to this level, marketing is confident that market share will increase by at least 50 percent (as a consequence of increased customer satisfaction). Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share. f. Accounting will be given the charge to install a quality information reporting system. Daily reports on operational quality data (e.g., percentage of defective units), weekly updates of trend graphs (posted throughout the division), and quarterly cost reports are the types of information required. g. To help direct the improvements in quality activities, kaizen costing is to be implemented. For example, for the year 20x1, a kaizen standard of 6 percent of the selling price per unit was set for rework costs, a 25 percent reduction from the current actual cost. To ensure that the quality improvements were directed and translated into concrete financial outcomes, Maria also began to implement a Balanced Scorecard for the division. By the end of 20x2, progress was being made. Sales had increased to 26,000,000, and the kaizen improvements were meeting or beating expectations. For example, rework costs had dropped to 1,500,000. At the end of 20x3, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report: Maria also received an income statement for 20x3: Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two-year period. Growth next year should be even greater as she was beginning to observe a favorable effect from the higher-quality products. Also, further quality cost reductions should materialize as incoming inspections were showing much higher-quality purchased components. Required: 1. Identify the strategic objectives, classified by the Balanced Scorecard perspective. Next, suggest measures for each objective. 2. Using the results from Requirement 1, describe Marias strategy using a series of if-then statements. Next, prepare a strategy map. 3. Explain how you would evaluate the success of the quality-driven turnaround strategy. What additional information would you like to have for this evaluation? 4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes. 5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?
- Kathy Shorts, president of Oliver Company, was concerned with the trend in sales and profitability. The company had been losing customers at an alarming rate. Furthermore, the company was barely breaking even. Investigation revealed that poor quality was at the root of the problem. At the end of 20x5, Kathy decided to begin a quality improvement program. As a first step, she identified the following costs in the accounting records as quality related: Required: 1. Prepare a quality cost report by quality cost category. 2. Calculate the relative distribution percentages for each quality cost category. Comment on the distribution. 3. Using the Taguchi loss function, an average loss per unit is computed to be 15 per unit. What are the hidden costs of external failure? How does this affect the relative distribution? 4. Shortss quality manager decided not to bother with the hidden costs. What do you think was his reasoning? Any efforts to reduce measured external failure costs will also reduce the hidden costs. Do you agree or disagree? Explain.Mallorys Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further? A. $5 per unit profit 8. $16 per unit profit C. $3 per unit loss D. $12 per unit lossDetermine the operating income for Vinnies Vinyls West score, assuming the warehouse allocation is reduced to 10% of sales for the warehouse and the difference will be charged to the West store. Management has determined that the warehouse takes fewer corporate resources and the allocation to the West store was lower than it should have been.