8. ShoppingKart, Inc. is a supermarket having three operating departments. An in
ID: 2379617 • Letter: 8
Question
8. ShoppingKart, Inc. is a supermarket having three operating departments. An income statement for the most recent month of operations is listed below.
GENERAL
MEAT
PRODUCE
TOTAL
Sales
$50,000
$40,000
$10,000
$100,000
Variable Costs
30,000
16,000
5,000
51,000
Contribution Margin
20,000
24,000
5,000
49,000
Fixed Costs:
Direct, avoidable
5,000
4,000
3,500
12,500
Common, allocated based
on sales dollars
10,000
8,000
2,000
20,000
Profit (Loss)
$ 5,000
$12,000
$( 500)
$ 16,500
If Shopping Kart, Inc. were to drop the Produce line and make no other changes, income for the month would be:
A-$12,000 B-$15,000 C-$16,000 D-$17,000
The space currently being used by Produce could be converted into a Deli Department. If this were done, expected Deli operations are as follows: sales of $20,000; variable costs of $8,000; avoidable fixed costs of $3,000. Assuming no changes for General and Meat departments, income for the month would be:
A-$23,500 B-$24,000 C-$24,500 D-some other
amount
GENERAL
MEAT
PRODUCE
TOTAL
Sales
$50,000
$40,000
$10,000
$100,000
Variable Costs
30,000
16,000
5,000
51,000
Contribution Margin
20,000
24,000
5,000
49,000
Fixed Costs:
Direct, avoidable
5,000
4,000
3,500
12,500
Common, allocated based
on sales dollars
10,000
8,000
2,000
20,000
Profit (Loss)
$ 5,000
$12,000
$( 500)
$ 16,500
Explanation / Answer
a)
new income = 16500 + 500 = 17000
so answer is D
b)
profit of deli department = 20000 - 8000 - 3000-2000 = 7000
ne income = 5000 + 12000 + 7000 = 24000
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