Jordan Sports Company sells logo sports merchandise and does custom screen printing. They are trying to...
Jordan Sports Company sells logo sports merchandise and does
custom screen printing. They are trying to decide whether or not to
continue screen printing. The following information is available
for the segments. Assume that all direct fixed costs could be
avoided if a segment is dropped and that the total common fixed
costs would remain unchanged if the screen printing were
dropped.
Screen Printing Apparel Sales
Sales $120,000 $420,000
Variable Costs 72,000 220,000
Contribution Margin 48,000 200,000
Direct Fixed Costs 32,000 70,000
Allocated Common Fixed costs 20,000 70,000
Net Income ($4,000) $60,000
Assume the more space will be allocated to apparel sales if screen
printing is dropped. This will allow apparel sales to increase by
25%. What is the impact on gross profits of a 25% increase in
apparel sales?
Gross profit will increase by $105,000
Gross profit will increase by $50,000
Gross profit will increase by $325,000
Gross profit will increase by $15,000
Homework Answers
Answer: Gross profit will increase by $ 50,000.
Increase in gross profit of apparel sales segment = $ 200,000 x 25 % =$ 50,000.
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Jordan Sports Company sells logo sports merchandise and does
custom screen printing. They are trying to...
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units. What is the financial advantage (disadvantage) of
discontinuing the Beta product line?
Required information [The following information applies to the questions displayed below.) Cane Company manufactures two products called Alpha and Beta that sell for $170 and $130, respectively. Each product uses only one type of raw...
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