sis Chapters 10, 12,.. TB MC Qu. 12-59 Lusk Corporation produces and sells... Lu

Question

sis Chapters 10, 12,.. TB MC Qu. 12-59 Lusk Corporation produces and sells... Lusk Corporation produces and sells 14,300 units of Product each month The seling price of ProductX is $25 per unt, and variable discontinued, the annual financial adväntage (disadvantage) for the company of eliminating this product should be 21 expenses are $19 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72.000 of the S 2 Multiple Choice $16.200 S55.800 546.200

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

21)

Current Net Income

Contribution per unit = Selling price per unit – Variable costs per unit

= $25 - $19

= $6 per unit

Total contribution

= Contribution per unit x Total units

= $6 x 14,300

= $85,800

So, Net Income

= Contribution – Fixed costs

= $85,800 - $102,000

= ($16,200)

Now, if the product is discontinued, $72,000 fixed cost will still be incurred as it is a sunk cost and cannot be avoided

So, Net Income

= Contribution – Fixed costs

= 0 - $72,000

= ($72,000)

So, Increase in loss

= Current loss – Previous loss

= ($72,000) - ($16,200)

= (55800)

The loss has increase as there is no contribution to cover up the fixed cost of $72,000

So, option B is the correct option

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.