EBK CORNERSTONES OF COST MANAGEMENT
3rd Edition
ISBN: 9781305147102
Author: MOWEN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 17, Problem 20E
To determine
Identify the correct option for the given statement.
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Cesar Company has three product lines: A, B and C. The information given
below is available. Assume Cesar Company drops Product C. Cesar
Company then doubles the production and sales of Product B without
?increasing fixed costs. What will happen to operating income
Product B
Product C
Sales
Variable costs
Contribution margin
Avoidable fixed costs
Unavoidable fixed costs
Operating income(loss)
Product A
$100,000
76,000
24,000
9,000
6,000
$9.000
$90,000
48,000
42,000
18,000
9,000
$15.000
$44,000
35,000
9,000
3,000
7,700
S(1,700)
increase by $42,000 O
increase by $18,000
increase by $36,000
increase by $15,000 )
increase by $24,000
If a company has excess capacity, it is contemplating whether a special order should be accepted. The
order will not impact regular sales. If the company accepts the special order, what will occur?
Incremental costs will not be affected
There are no incremental revenues.
O Net income will increase if the special sales price per unit exceeds the unit variable costs,
Both foxed and variable costs will increase.
Cesar Company has three product lines: A, B and C. The information given
below is available. Assume Cesar Company drops Product C. Cesar
Company then doubles the production and sales of Product B without
?increasing fixed costs. What will happen to operating income
Sales
Variable costs
Contribution margin
Avoidable fixed costs
Unavoidable fixed costs
Operating income(loss)
Product A
S100,000
76,000
24,000
9,000
6.000
$9.000
Product B
$90,000
48,000
42,000
18,000
9,000
$15.000
Product C
$44,000
35,000
9,000
3,000
7.700
S(1,700)
increase by $18,000 O
increase by ST15,000 ()
increase by $36,000
increase by $24,000
increase by $42,000 )
Chapter 17 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
Ch. 17 - What is tactical decision making?Ch. 17 - Tactical decisions are often small-scale decisions...Ch. 17 - What is tactical cost analysis? What steps in the...Ch. 17 - What is a relevant cost? Explain why depreciation...Ch. 17 - Give an example of a future cost that is not...Ch. 17 - Prob. 7DQCh. 17 - Can direct materials ever be irrelevant in a...Ch. 17 - What role do past costs play in tactical cost...Ch. 17 - When will flexible resources be relevant to a...Ch. 17 - Prob. 11DQ
Ch. 17 - Prob. 12DQCh. 17 - Prob. 13DQCh. 17 - Prob. 14DQCh. 17 - Why would a firm ever offer a price on a product...Ch. 17 - Each year, Basu Company produces 18,000 units of a...Ch. 17 - Reshier Company makes three types of rug...Ch. 17 - Sequoia Paper Products, Inc., manufactures boxed...Ch. 17 - Betram Chemicals Company processes a number of...Ch. 17 - Prob. 5ECh. 17 - Elliott, Inc., has four salaried clerks to process...Ch. 17 - Prob. 7ECh. 17 - Feinan Sports, Inc., manufactures sporting...Ch. 17 - Wehner Company is currently manufacturing Part...Ch. 17 - Brees, Inc., a manufacturer of golf carts, has...Ch. 17 - Prob. 11ECh. 17 - Nutterco, Inc., produces two types of nut butter:...Ch. 17 - Carleigh, Inc., is a pork processor. Its plants,...Ch. 17 - Global Reach, Inc., is considering opening a new...Ch. 17 - Tony and Tina Roselli own and run TNTs Pizza...Ch. 17 - Jason Rogers works full-time for UPS and runs a...Ch. 17 - Prob. 17ECh. 17 - Prob. 18ECh. 17 - Prob. 19ECh. 17 - Prob. 20ECh. 17 - Prob. 21ECh. 17 - Prob. 22ECh. 17 - Norton Products, Inc., manufactures...Ch. 17 - Prob. 24PCh. 17 - Fiorello Company manufactures two types of...Ch. 17 - St. Johns Medical Center (SJMC) has five medical...Ch. 17 - Brandy Dees recently bought Nievo Enterprises, a...Ch. 17 - Apollonia Dental Services is part of an HMO that...Ch. 17 - Pharmaco Corporation buys three chemicals that are...Ch. 17 - KarlAuto Corporation manufactures automobiles,...Ch. 17 - Morrill Company produces two different types of...Ch. 17 - Paladin Company manufactures plain-paper fax...
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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
- Which of the following occurs if a company experiences a decrease in its fixed costs? Select one: O a. Income would decrease. O b. The break-even point would decrease. O c. The break-even point would increase. O d. More than one of the answers would occur. e. The contribution margin would decrease.arrow_forwardEach of a company's two product lines has a different contribution margin ratio. If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the lower contribution ratio, which of the following is true? a. operating income will decrease. b. all of the answers are true . c. the breakeven point will increase . d. Fixed cost will be constant . e. the average contribution margin ratio will decreasearrow_forwardWhich of the following occurs if a company experiences an increase in its fixed costs? Select one: O a. Net income would decrease. O b. The contribution margin would increase. Oc The contribution margin would decrease. Od. The break-even point would decra2se, Oe. More than one.of the answers, would.occur.arrow_forward
- Each of a company's two product lines has a different contribution margin ratio . If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio , which of the following is true ? O a Fixed cost will be constant . . the breakeven point will decrease . Ocall of the answers are true . d the average contribution margin ratio will increase . O e operating income will increasearrow_forwardCompany XYZ sells two products: AAA and BBB. Product BBB has a lower selling price but higher contribution margin compared to product AAA. Assume that the factory has fixed production capacity. If Company XYZ decided to produce and sell more units of product BBB compared to product AAA, which one of the following is likely to happen? Select one: O a. Total profits will remain the same O b. Total profits will decrease O c. Total profit will increase O d. None of the given answers O e. Total sales will increasearrow_forwardCompany X has two products: Product A and product B. Product A has a higher selling price but a lower contribution margin. Company X has fixed production capacity. If company X decided to change the current product mix by ?producing and selling more units of product A, what would be the effect on Operating Income Cannot be determined a Operating income would decrease b O Operating Income would increase .c O None of the given answers d O Operating Income would remain the same e Oarrow_forward
- :Holding other factors constant, a company's contribution margin per unit will increase with All answers given are NOT correct .a O any increase in variable cost per unit .b O .any increase in quantity sold .c O any increase in the selling price per unit .d O increase in its total fixed costs .e Oarrow_forwardwhat is the Revenue, cost and profit functions for the problem below? Orange Company buys Product A for P15 per units and sells them for P25 per unit. There areno other variable costs. Fixed cost is P6,000. Use the breakeven formula to determine thefollowing:a. Revenue, cost and profit functions.arrow_forwardHolding other factors constant, a company's contribution margin per unit will increase with: a. All answers given are NOT correct. O b. any increase in quantity sold. С. any increase in variable cost per unit O d. any decrease in the selling price per unit e. increase in its total fixed costsarrow_forward
- Which of the following is true regarding the contribution margin ratio of a company that produces only a single product? Select one: a. The contribution margin ratio equals the selling price per unit less the variable expense ratio. b. The contribution margin per unit multiplied by the selling price per unit equals the contribution margin ratio. c. None of the given answer is correct. d. As fixed expenses decrease, the contribution margin ratio increases. e. The contribution margin ratio will decline as unit sales decline.arrow_forwardCentral Industries has three product lines: A, B, and C. The information given below is available. Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C ?and does not replace it. What will happen to operating income Sales Variable costs Contribution margin. Avoidable fixed costs Unavoidable fixed costs Operating income(loss) Product A $100,000 76.000 24,000 9,000 6.000 $9.000 Product B S90,000 48,000 42,000 18,000 9.000 $15.000 Product C $44,000 35,000 9,000 3,000 7.700 S(1.700) increase by $600 increase by S1,700 () decrease by S6,000 decrease by S9,000 ) increase by S2,400 ()arrow_forwardHolding other factors constant, a company's contribution margin per unit will increase with: a. any increase in variable cost per unit O b. any increase in quantity sold. Oc. any increase in the selling price per unit O d. increase in its total fixed costs O e. All answers given are NOT correct. If sales are $20,000, variable costs are $8,000, and fixed costs are $2,000, the contribution margin rati is: (rounded to the nearest number) ed O a. 10% z of O b. 50% F1 F2 F3 F4 F5 F6 F7 F8 F9 %23 2$ & 2 4 6. 7 8. Q E R T Y A S F C { V }BYNI > 1.arrow_forward
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