Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the followin

Question

Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following product-line income data:

Product

The following additional information is available:

The factory rent of $1,580 assigned to Product C is avoidable if the product were dropped.

The company's total depreciation would not be affected by dropping C.

Eliminating Product C will reduce the monthly utility bill from $2,300 to $880.

All supervisors' salaries are avoidable.

If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from $3,960 to $2,800.

Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total $3,800.

Required:

Mr. Earl Pearl, accountant for Margie Knall Co., Inc., has prepared the following product-line income data:

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

The net disadvantage would be 9080 - 5640 = 3440

Part B:

No.

Thanks.

With C Without C
Total Total Sales 116000 80000 Variable expenses 62400 41600 Contribution margin 53600 38400 Fixed expenses:

Rent 7400 5820 Depreciation 8400 8400 Supervisor's Salary 6680 2880 Utilities 5680 4260 Maintenance 3960 2800 Administrative expenses 12400 8600 Total Fixed expenses 44520 32760 Net operating income 9080 5640

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---