Analyzing Operational Changes Operating results for department B of Shaw Company
ID: 2545192 • Letter: A
Question
Analyzing Operational Changes
Operating results for department B of Shaw Company during 2016 are as follows:
If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of $53,000, what would be the effect on the department's net income or net loss? (Ignore income tax in your calculations.)
Use a negative sign with your answer to indicate if the effect increases the company's net loss.
If Department B increased its selling price by 10%, the effect on net income (loss) would be $Answer
Sales $790,000 Cost of goods sold 480,000 Gross profit 310,000 Direct expenses 215,000 Common expenses 123,000 Total expenses 338,000 Net loss $(28,000) CLICK HERE TO REVIEW LEARNING OBJECTIVES QUESTION 1 Not complete Points out of 2.00 Analyzing Operational Changes PFlag question Operating results for department B of Shaw Company during 2016 are as follows: Sales Cost of goods sold Gross profit Direct expenses Common expenses Total expenses Net loss $790,000 480,000 310,000 215,000 123,000 338,000 $(28,000) If department B could maintain the same physical volume of product sold while raising selling prices an average of 10% and making an additional advertising expenditure of $53,000, what would be the effect on the department's net income or net loss? (Ignore income tax in your calculations.) Use a negative sign with your answer to indicate if the effect increases the company's net loss. If Department B increased its selling price by 10%, the effect on net income (loss) would be $ CheckExplanation / Answer
If Department B increased its selling price by 10%, the effect on net income(loss) would be 26,000 (28,000-2,000)
The net loss decreases by 26,000
Sales [790,000+(790,000*10%)] 869,000 Cost of goods sold 480,000 Gross profit (sales - cost of goods sold) 389,000 Direct expenses (215,000+53,000) 268,000 Common expenses 123,000 Total expenses 391,000 Net loss 2,000