INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
8th Edition
ISBN: 9781260118742
Author: BREWER
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 11, Problem 21P
Requirement - 1:
To determine
Continue or Discontinue: For making decision about continuing or discontinuing a flight, we need to know the impact of that flight on the overall profits of the firm. So when overall operating profits are higher in case of continuing a flight then we will continue with the flight or vice versa.
To identify: Financial advantage (disadvantage) of discontinuing flight 482.
Requirement - 2:
To determine
To Explain: Impact of elimination of 10% its’ flight on profits.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Pac Coast Airlines has been incurring losses for the past few years. In an attempt to improve
the overallfinancial performance of the company, the general manager is considering
discontinuing several of theflights. Flight 102 from Atlanta, Georgia to Paris, France is one such
flight. The contribution marginstatement for this particular flight is shown below.Pac Coast
AirlinesContribution Margin Statement For the Year Ended December 31, 2019Flight 102
Revenue $2,000,000Less: Variable Costs 1,500,000Contribution Margin 500,000Less: Fixed
Costs 800,000Income from Operations ($300,000) The following additional information is also
available regarding flight 102: 80% of the segments fixed costs will remain with the company if
the flight is discontinued. The remaining20% of the fixed costs will no longer be incurred by
the company if the flight is discontinued. If the flight is discontinued, contribution margin will
increase by a total of $200,000 in other segments ofPac Coast Airlines.Should…
ABC Airlines is a commercial airline that targets business and nonbusiness travelers. In recent months, the airline has been unprofitable. The company has break-even sales volume of 75% of capacity, which is significantly higher than the industry average of 65%. ABC's CEO, Richard Buchanan, is concerned about the recent string of losses and is considering a strategic plan that could reduce the break-even sales volume by increasing ticket prices. He has asked for your help in evaluating this plan.
Instruction:
As management accountants, write a brief memo to Richard Buchanan evaluating this strategy by discussing the advantages/disadvantages of increasing the ticket prices and its effect on the break even sales volume for ABC Airlines.
Members of the board of directors of Security Team have received the following operating income data for the year ended May 31, 2018:
E (Click the icon to view the operating income data.)
Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to determine whether the company
should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $84,000 and decrease fixed
selling and administrative expenses by $10,000.
Read the requirements.
Requirement 1. Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. (Use parentheses or a minus
sign to enter decreases to profits.)
in operating income
- X
Requirements
1. Prepare a differential analysis to show whether Security Team should drop the industrial
systems product line.
2. Prepare contribution margin income statements to show Security Team's total operating…
Chapter 11 Solutions
INTRO TO MANAGERIAL ACCT-CONNECT ACCESS
Ch. 11 - What is a relevant cost?Ch. 11 - Define the following terms: incremental cost,...Ch. 11 - Are variable costs always relevant costs? Explain.Ch. 11 - Prob. 4QCh. 11 - “Variable costs and differential costs mean the...Ch. 11 - Prob. 6QCh. 11 - Prentice Company is considering dropping one of...Ch. 11 - Prob. 8QCh. 11 - What is the danger in allocating common fixed...Ch. 11 - Prob. 10Q
Ch. 11 - Give at least four examples of possible...Ch. 11 - Prob. 12QCh. 11 - Define the following terms: joint products, joint...Ch. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - The Excel worksheet form that appears below is to...Ch. 11 - The Excel worksheet form that appears below is to...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 9F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Cane Company manufactures two products called...Ch. 11 - Identifying Relevant Costs Syahn, AB, is a Swedish...Ch. 11 - Prob. 2ECh. 11 - Make or Buy Decision Troy Engines, Ltd,...Ch. 11 - Special Order Decision Imperial Jewelers...Ch. 11 - Volume Trade-off Decisions Outdoor Luggage, Inc.,...Ch. 11 - Prob. 6ECh. 11 - Sell or Process Further Decisions Dorsey Company...Ch. 11 - Volume Trade-Off Decisions Barlow Company...Ch. 11 - Special Order Decision Delta Company produces a...Ch. 11 - Make or Buy Decision Futura Company purchases the...Ch. 11 - Make or Buy Decision Han Products manufactures...Ch. 11 - Volume Trade-Off Decisions Benoit Company produces...Ch. 11 - Prob. 13ECh. 11 - Identification of Relevant Costs Kristen Lu...Ch. 11 - Prob. 15ECh. 11 - Identification of Relevant Costs Bill has just...Ch. 11 - Prob. 17ECh. 11 - Prob. 18PCh. 11 - Dropping or Retaining a Segment Jackson Count...Ch. 11 - Sell or Process Further Decision (Prepared from a...Ch. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Make or Buy Decision Silven Industries, which...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Close or Retain a Store Superior Markets. Inc.,...Ch. 11 - Sell or Process Further Decisions Come-Clean...Ch. 11 - Make or Buy Decisions “In my opinion, we ought to...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The management of Woznick Corporation has been concerned for some time with the financial performance of its product V860 and has considered discontinuing it on several occasions. Data from the company's accounting system for this product for last year appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $30,000 of the fixed manufacturing expenses and $13,000 of the fixed selling and administrative expenses are avoidable if product V860 is discontinued. What would be the financial advantage (disadvantage) from dropping product V860? Multiple Choice ($35,000) ($5,000) $35,000 $5,000 $ 150,000 $ 72,000 $50,000 $ 33,000 FFF Nextarrow_forwardThe management of Wengel Corporation is considering dropping product B90D. Data from the company's accounting system appear below: Sales Variable expenses Fixed manufacturing expenses Fixed selling and administrative expenses All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $179,000 of the fixed manufacturing expenses and $155,200 of the fixed selling and administrative expenses are avoidable if product B90D is discontinued. Required: What would be the financial advantage (disadvantage) of dropping B90D? Should the product be dropped? Net operating income (loss) would $ 745,000 $ 387,000 $ 253,400 $216,200 decline increase by if product B90D were dropped. Therefore, the product droppedarrow_forwardMembers of the board of directors of Safety Place have received the following operating income data for the year ended May 31, 2018: (Click the icon to view the operating income data.) Members of the board are surprised that the industrial systems product line is not profitable. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $80,000 and decrease fixed selling and administrative expenses by $10,000. Read the requirements. Requirement 1. Prepare a differential analysis to show whether Safety Place should drop the industrial systems product line. (Use parentheses or a minus sign to enter decreases to profits.) in operating incomearrow_forward
- Kendall & Floyd provides landscaping services in Eastvale. Sara Kendall, the owner, is concerned about the recent losses the company has incurred and is considering dropping its yard cleanup services, which she feels are marginal to the company's business. She estimates that doing so will result in lost revenues of $67,800 per year (including the lost tree business from customers who use the company for both services). The present manager will continue to supervise the tree services with no reduction in salary. Without the yard cleanup business, Sara estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also expects to save 29 percent on rent and utilities. The Income statement before dropping the yard cleanup service follows. Required: a. Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued. b. Should Sara discontinue the yard cleanup service? Complete this question by entering your answers…arrow_forwardSophia & More Company sells clothing, shoes and accessories at a city location near you. Information for the just concluded calendar year follows. Management is considering closing the Shoe segment because of the operating loss and is thinking about expanding the space that is currently devoted to the Accessories segment. A salaried salesperson in the Shoe segment who earns $45,000 will be terminated; however, all other segmental fixed costs will continue to be incurred. Sophia & More will spend $16,000 on remodeling costs and anticipates that sales in the Accessories segment will increase by $70,000. This additional sales revenue is expected to generate a 35% contribution margin for the company. Finally, because clothing customers often purchased shoes and feel strongly about "one-stop shopping," clothing sales are expected to fall by 15% if the Shoe segment is closed. Required: Using incremental analysis, determine whether the Shoe segment should be closed and if so, what…arrow_forwardKC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels are marginal to the company’s business. She estimates that doing so will result in lost revenues of $59,000 per year (including the lost tree business from customers who use the company for both services). The present manager will continue to supervise the tree services with no reduction in salary. Without the lawn business, Kate estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also expects to save 15 percent on rent and utilities. Required: a. Prepare a report of the differential costs and revenues if the lawn service is discontinued. (Enter loss amount with minus sign.) KC SERVICES Annual Income Statement…arrow_forward
- A payday loan company has decided to open several new locations in a city and hires consultants to decide where to open these locations. The consultants are paid per store that is opened, and at the end of the quarter, the company notices a many of the new stores' sales volume fail to meet expectations. To incentivize the consultants to instead focus on opening profitable stores, the company decided to alter the compensation to a percentage of the profit earned per new store. This puts the consultants_ and the payday loan company should expect to compensate for this change. to Group of answer choices 1. In a less risky position; pay the consultants more than they would in the per- store scheme 2. A more risky position; pay the consultants less than they would in the per- store scheme 3. In a less risky position; pay the consultants less than they would in the per- store scheme 4. A more risky position; pay the consultants more than they would in the per- store schemearrow_forward5 In an effort to increase profits, Pegasus Airlines is thinking about dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats x 40% occupancy × $200 ticket price). Variable expenses ($15 per person) Contribution margin Flight expenses: Salaries, flight crew Flight promotion Depreciation of aircraft Fuel for aircraft Liability insurance Salaries, flight assistants Baggage loading and flight preparation Overnight costs for flight crew and assistants at destination Total flight expenses Net operating loss $ 14,000 1,050 12,950 $ 1,800 750 1,550 5,800 4,200 1,500 1,700 300 17,600 $ (4,650) 100.0% 7.5 92.5% The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a…arrow_forwardProblem-solving 2: Dropping or Retaining a Flight Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company's performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (175 seats x 40% occupancy x $200 ticket price)...... Variable expenses ($15 per person). Contribution margin Flight expenses: Salaries, flight crew.. Flight promotion. Depreciation of aircraft Fuel for aircraft Liability insurance. Salaries, flight assistants. Baggage loading and flight preparation Overnight costs for flight crew and assistants at destination.... Total flight expenses.. Net operating loss.. $14,000 1,050 12,950 1,800 750 1,550 5,800 4,200 1,500 1,700 300 17,600 $ (4,650) 100.0% 7.5 92.5% The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual…arrow_forward
- Little Cory Corporation is considering dropping product G41O. Data from the company's accounting system appear below: All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $117,000 of the fixed manufacturing expenses and $46,000 of the fixed selling and administrative expenses are avoidable if product G41O is discontinued.Required:a. According to the company's accounting system, what is the net operating income earned by product G41O? b. What would be the effect on the company's overall net operating income of dropping product G41O? Should the product be dropped? There is not a word length requirement for this question; however, you must show your work. sales 450,000 variable expenses 185,000 fixesd manufacturing expenses 149,000 fixed selling and administered expenses 113,000arrow_forwardA company spent P10,000.00 in training its employees to use the new online Accounting System. The system turns out to be heavily unreliable and cannot be used with the current recording standards. The management wants to discontinue the use of the new system. The P10,000.00 spent to train the employees is a: Omarginal cost discretionary cost sunk cost opportunity costarrow_forwardMaking decisions about dropping a product Members of the board of directors of Security Team have received the following operating income data for the year ended March 31, 2018: Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should drop the line. Company accountants estimate that dropping industrial systems will decrease fixed cost of goods sold by $81,000 and decrease fixed selling and administrative expenses by $15,000. Requirements Prepare a differential analysis to show whether Security Team should drop the industrial systems product line. Prepare contribution margin income statements to show Security Team’s total operating income under the two alternatives: (a) with the industrial systems line and without the line. Compare the difference between the two alternatives’ income numbers to your answer to Requirement l. What have you learned from this comparison in Requirement 2?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning