Solution:
When a department or product line is dropped, the common fixed costs which had been allocated to that department "are allocated to the remaining departments or product lines".
Because common fixed costs are not avoidable or eliminated.
Hence third option is correct.
When a department or product line is dropped, the common fixed costs which had been allocated...
The following monthly segmented income statement is for Condiment Company, which has three separate product lines (A, B, and C). A B C Total Sales revenue $37,500 $50,000 $12,500 $100,000 Variable costs $16,000 $27,500 $5,000 $48,500 Contribution margin $21,500 $22,500 $7,500 $51,500 Direct fixed costs $19,500 $16,000 $3,500 $39,000 Allocated fixed costs $3,750 $5,000 $1,250 $10,000 Profit (loss) $(1,750) $1,500 $2,750 $2,500 Management is concerned about the losses associated with product line A and is considering dropping this product line....
Sugartown, Inc. has three product lines in its retail stores: cookies, cakes, and candy. The allocated fixed costs are based on units sold and are unavoidable. Results of June follow: Cookies Cakes Candy Total Units sold 2,400 1,600 2,000 6,000 Revenue 25,000 50,000 75,000 150,000 Variable department costs 12,000 37,000 41,000 90,000 Direct fixed costs 6,200 8,000 19,000 33,200 Allocated fixed costs 5,000 6,500 7,000 18,500 Operating income (loss) $1,800 ($1,500) $8,000 $8,300 Demand of individual products...
Please answer all the question!!!
5. When will the elimination overall profit? a. When the b. When th of a product line have no effect on the company's avoidable fixed costs equal the product line's contribution margin e unavoidable fixed costs equal the product line's contribution margin d when there are no fixed costs incurred by the product line d. When the product line contribution margi n is negative 6. All of the following are relevant to the sell or...
Discontinue?
Chapter 8: Dropping a product line The managers at Manchester's Department Store are concerned about the operation of its sporting goods department, which has not been very successful. The following condensed income statement gives the latest year's results: Manchester Department Store Contribution Margin Income Statement For the Year Ended December 31 Product Lines Sporting Goods $480,000 $385,000 $95,000 All Other Departments $2,400,000 $1,560,000 $840,000 Totals Sales Revenue $2,880,000 $1.945,000 $935,000 Less: Variable Costs: Contribution Margin Less: Fixed Costs Manufacturing...
CONTINUING A PRODUCT LINE Aquilino Inc. produces two types of rowing machines, the Deluxe and the Regular models. A recent segmented income statement is shown below. Regular Deluxe Total__ Sales $ 160,000 $ 240,000 $ 400,000 Less: Variable costs 120,000 160,000 280,000 Contribution margin 40,000 80,000 120,000 Less: Direct fixed costs 32,000 20,000 52,000 Segment Margin 8,000 60,000 68,000 Common fixed costs (allocated) 10,000 50,000 ...
Multiple Choice Question 153 A company has three product lines, one of which reflects the following results: Sales Variable expenses Contribution margin Fixed expenses Net loss $184000 101000 83000 130000 $ (47000) If this product line is eliminated, 60% of the wed expenses can be eliminated and the other 40% will be located to other product lines. It management decides to eliminate this product line, the company's net income will increase by $5000 decrease by S5000 increase by 547000 decrease...
A product line should be dropped when a. All of the answer choices are correct. b. has unavoidable fixed costs. c. it has a positive contribution margin. d. there will be a positive change in income if the product line is dropped.
Hayden Manufacturing has three product lines. Its only unprofitable product line is Product 22 which generates sales of $700,000 per year. The annual costs associated with Product 22 are $460,000 of variable expenses and $300,000 of fixed expenses. If Hayden eliminates the Product 22 line, 30% of the fixed expenses can be eliminated. What are the relevant costs that should be analyzed by Hayden’s managers in making this decision?
Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $41,000. The division sales for the year were $941,000 and the variable costs were $465,000. The fixed costs of the division were $517,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be: Multiple Choice O $269,200 increase O $476,000 decrease...
Case #4 Penna Company manufactures three product lines. The following operating data have been gathered for the most recent quarter: Caxton Tinta Bozze Total Sales $750,000 $300,000 $450,000 $1,500,000 Variable costs $450,000 $150,000 $300,000 $900,000 Contribution margin 300,000 150,000 150,000 600,000 Fixed costs Rent $37,500 $15,000 $22,500 $75,000 Depreciation $45,000 $18,000 $27,000 $90,000 Utilities $30,000 $7,500 $22,500 $60,000 Supervision $22,500 $7,500 $45,000 $75,000 Maintenance S22,500 $9,000 $13,500 $45,000 Administrative $45,000 $30,000 $75,000 $150,000 Total fixed costs 202,500 87,000 205,500 495,000...