7) Jim Bean Company has three product lines: D, E, and F. The following informat
ID: 2514011 • Letter: 7
Question
7) Jim Bean Company has three product lines: D, E, and F. The following information is available Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) 80,000$42,000 521,000 40,000$21,000 12.000 $15.000 $6,000 $20,000 $12,000 $ 8,000 40.000 s 28,000 s(9,000) Jim Bean Company is thinking of discontinuing product line F because it is reporting an operating loss. All fixed costs are unavoidable. Assuming Jim Bean Company discontinues line F and is able to double the production and sales of product line E without increasing fixed costs. What affect will this have on operating income? 8) The Nut House sells almonds, cashews, and pistachios. They sold 10,000 cans last year. Pistachios outsold cashews by a margin of 2 to 1 in cans. Sales of almonds were half the sales of cashews in cans. Fixed costs for the Nut House are $20,000 and additional information follows Unit Variabl Cost $4.00 $5.0 6.00 $4.00 Unit Sales Price Product SAlmonds Cashews 2 Pistachios $8.0 $10.00 What is the breakeven sales volume and dollars for each nut (rounded)? (10 points)Explanation / Answer
ANSWER
7. Because of discontinuing of F, Increasing double production of the E without increasing fixed cost, means overall profit of the organisation . That is positive sign for the company. Because of that overall operating profit will increase. Hence operating Income will increase because decrease fixed cost.
8.Calculation of breakeven sales volume & dollars for each nuParticulars
BEP (Sales Units)
= Fixed cost / contributionper unit
=20,000/4
=5,000units
=20,000/5
=4,000units
=20,000/2
=10,000units
Profit Volume Ratio
=Contribution / Sales
=4/8
=50%
=5/10
=50%
=2/6
=33.33%
BEP (Sales Volume)
=Fixed cost/PV Ratio
=20,000 / 50%
=40,000
=20,000/ 50%
=40,000
=20,000/33.33%
=60,000
Particulars Almonds ($) Cashews ($) Pistachios ($) Sales Price 8 10 6 Less: Variable Cost (4) (5) (4) Contribution 4 5 2 Fixed Cost 20,000 20,000 20,000BEP (Sales Units)
= Fixed cost / contributionper unit
=20,000/4
=5,000units
=20,000/5
=4,000units
=20,000/2
=10,000units
Profit Volume Ratio
=Contribution / Sales
=4/8
=50%
=5/10
=50%
=2/6
=33.33%
BEP (Sales Volume)
=Fixed cost/PV Ratio
=20,000 / 50%
=40,000
=20,000/ 50%
=40,000
=20,000/33.33%
=60,000
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