Villatech, Incorporated produces three models of tablet computers-the J-touch, B-touch, and L-touch. The company is considering eliminating the B-touch model because it has been incurring operating losses for thepast few years. The J-touch and L-touch have impressive sales records and have the potential to grow in the future.Sale RevenueLess: Variable costsContribution marginLess: Direct fixed costsTotalB-touch$ 500,000270,000$ 230,000105,000$ 125,000130,000$ 2,000,0001,040,000$ 960,000230,000$ 730,000520,000Segment marginLess: Common fixed costsNet operating income (loss)$ (5,000)$ 210,000The management expects that the elimination of the B-touch would increase sales of the L-touch by 40%. If Villatech eliminates the B-touch, its net operating income willMultiple ChoiceIncrease by $32,000 increaseDecrease by $125,000Increase by $27,000Increase by $5,000J-touch$ 800,000450,000$ 350,00070,000$ 280,000208,00072,000Decrease by $152,000L-touch$ 700,000320,000$ 380,00055,000$ 325,000182,000$ 143,000

When deciding whether to keep or drop a product line, various factors should be considered. The…

Answered: Villatech, Incorporated produces three…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 5P

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Hint(s) Check My Work Cox Electric makes electronic components and has estimated the following for a new design of one of its products: Fixed Cost $9,000 == Material cost per unit = $0.15 Labor cost per unit = $0.10 Revenue per unit = $0.65 Production Volume = 12,000 Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, build a spreadsheet model that calculates the profit by subtracting the fixed cost and total variable cost from total revenue, and answer the following questions. (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = total cost, yielding a profit of zero. Vary production volume from 5,000 to 50,000 in increments of 5,000. In which interval of production volume does breakeven occur? to units (b) Use Goal Seek to find the exact…

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