The income statement for Slumber Company is divided by its two product lines, blankets and pillows, as follows:Sales revenueVariable costsContribution marginFixed costsOperating income (loss)Blankets$620,000Pillows$298,000Total$918,000(465,000) (242,000) (707,000)$155,000 $56,000 $211,000(75,000) (74,000) (149,000)$80,000 $(18,000)$62,000Slumber is considering eliminating the pillows product line. If this line is eliminated, Slumber will be able to eliminate$74,000 of total fixed costs. How would this business decision impact operating income?A. increase of $130,000 in operating incomeOB. increase of $18,000 in operating incomeOC. decrease of $56,000 in operating incomeOD. increase of $74,000 in operating income

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following CVP income statements are available for Blanc Company and Noir Company. Sales Variable costs Contribution margin Fixed costs Net income (a1) Blanc Company Noir Company $505,000 $505,000 303,000 252,500 252,500 242,400 $10,100 * Your answer is incorrect. Blanc Company 202,000 191,900 $10,100 Calculate Contribution margin ratio. (Round answers to 2 decimal places, e.g. 0.32.) Noir Company Contribution Margin Ratio 40% 50%
Blossom Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income (a) Tingler Shocker Stunner $296,000 $504,000 $200,000 145.000 190,000 151,000 314,000 114,840 225,160 $36,160 $88,840 Net income Fixed expenses consist of $290,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $29,000 (Tingler). $79.000 (Shocker), and $34,000 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. Compute current net income for Blossom Company. 135,000 65,000 92,000 $(27,000)
The following information is available for Bramble Corp.: Sales Cost of goods sold $520000 0 0 0 0 300000 Total fixed expenses A CVP income statement would report contribution gross profit of $220000. contribution gross profit of $260000. Total variable expenses margin of $260000. margin of $370000. $150000 260000
Asha Inc. and Samir Inc. have the following operating data: Sales Variable costs Contribution margin Fixed costs Asha Inc. $2,500,000 (1,500,000) $1,000,000 (800,000) $200,000 Asha Inc. Samir Inc. Samir Inc. $4,000,000 (2,500,000) $1,500,000 (900,000) $600,000 Operating income a. Compute the operating leverage for Asha Inc. and Samir Inc. If required, round to one decimal place. Asha Inc. 150 75 Samir Inc. b. How much would operating income increase for each company if the sales of each increased by 30%? Dollars Percentage 30 % 30 % c. The difference in the increases of operating income is due to the difference in the operating leverages. Asha Inc.'s higher operating leverage means that its fixed costs are a smaller Inc.'s. percentage of contribution margin than are Samir
The following data are for Moss Creek Apparel: East West Sales volume (units): Product XX 6,500 6,800 Product YY 3,000 5,000 Sales price: Product XX $17 $16 Product YY $22 $23 Variable cost per unit: Product XX $10 $10 Product YY $13 $13 a. Determine the contribution margin for Product YY. $ b. Determine the contribution margin for the West Region.
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $330 $1,795 Less: Variable expenses 1,115 45 264 1,424 Contribution margin $165 $140 $66 $371 Less direct fixed expenses: Depreciation 50 15 11 76 Salaries 95 85 116 296 Segment margin $20 $40 $(61) $-1 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that each of the three products has a different supervisor whose position would remain if the associated product were dropped. Required: CONCEPTUAL CONNECTION: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15".
The following operating income data about the performance of the two product lines: Sales revenue. Cost of goods sold: Variable.. Fixed... Total cost of goods sold. Gross profit.. Marketing and administrative expenses: Variable.. Fixed.. Total marketing and administrative expenses Operating income (loss).... Product Line Industrial Systems $330,000 Household Systems Total $360,000 $690,000 $ 35,000 $44,000 $79,000 250,000 67,000 317,000 $285,000 $ 45,000 Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall $111,000 $396,000 $249,000 $294,000 62,000 39,000 $101,000 $99,000 $200,000 $ (56,000) $150,000 $94,000 76,000 138,000 23,000 62,000 The product line is losing money so with a commission study it will determine whether the company should discontinue the product line. Company accountants estimate that discontinuing, will decrease fixed cost of goods sold by $81,000 and decrease fixed marketing and administrative expenses by $14,000. Production engineers believe that…
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Gibson Franklin Number of customers (a) 81 81 Sales revenue (a × $210) $17,010 $17,010 Variable cost (a × $190) N/A (15,390) Contribution margin 17,010 1,620 Fixed cost (15,390) 0 Net income $1,620 $1,620 Required Reconstruct Gibson’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Franklin by lowering the sales price to $110 per customer. Reconstruct Franklin’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Gibson by lowering the sales price to $110 per customer.
The following data are for Elm Leaf Apparel: Sales volume (units): Product XX Product YY Sales price: Product XX Product YY Variable cost per unit: A Product XX Product YY East 8,000 6,000 $22 $26 $13 $16 West 6,400 12,800 a. Determine the contribution margin for Product YY. $21 $28 $13 $16 b. Determine the contribution margin for the West Region.
Crane Manufacturing Ltd. has provided you with the following CVP income statement. Sales (1,460 units) Variable costs: Cost of goods sold Selling expenses Administrative expenses Contribution margin Fixed costs: Cost of goods sold Selling expenses Administrative expenses Operating income $1,022,000 454,060 81,760 67,160 419, 20 153,300 52,560 33,580 $179,580 a. Calculate the contribution margin ratio. b. Calculate the break-even point in sales dollars and number of units.
Required information [The following information applies to the questions displayed below.] Information for Pueblo Company follows: Sales Revenue Less: Total Variable Cost Contribution Margin Weighted average CM ratio Product A Product B $ 60,000 $ 31,490 $ 28,510 Required: Determine Pueblo's (overall) weighted-average contribution margin ratio. Note: Do not round intermediate calculations. % $ 57,000 $ 11,800 $ 45,200
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Gibson Jordan Number of customers (a) Sales revenue (a x $200) Variable cost (a x $185) Variable cost (a x $0) Contribution margin 89 89 $ 17,800 $ 17,800 N/A (16,465) N/A 17,800 (16,465) $ 1,335 1,335 Fixed cost Net income 1,335 Required a. Reconstruct Jordan's income statement, assuming that it serves 178 customers when it lures 89 customers away from Gibson by lowering the sales price to $100 per customer. b. Reconstruct Gibson's income statement, assuming that it serves 178 customers when it lures 89 customers away from Jordan by lowering the sales price to $100 per customer.

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