13 points] Mr. Earl Pearl, accountant for Margie Knall Co, Inc., has prepa data:

Question

13 points] Mr. Earl Pearl, accountant for Margie Knall Co, Inc., has prepa data: Product Sales Variable expense Contribution margin Fixed expenses: Total 100,000 $50,000 $20,000 $30,000 0.000 20000 10,000 10.000 0.000 30,00010000 20,000 Rent. Depreciation Utilities.. Supervisors' salaries. Maintenance.10.000 Administrative expenses....10.000 5,000 2,500 1,000 1,500 6,000 3,000 4,000 2,000 5,000 3,000 1,800 1,500 1,200 3,000 900 1.500 1,500 3,000 500 Total fixed expenses Net operating income 3,000 13500 .000 $6.500 S4200 S(3.700) The following additional information is available: The factory rent of $1,500 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 $1,500 to $800. All supervisors' salaries are avoidable. If Product C is from $3,000 to $2,000. Elimination of Product C will make it possible to cut two persons from the administrati combined salaries total $3,000 discontinued, the maintenance department will be able to reduce monthly expenses ve staff, theitr Required: Prepare an analysis showing whether Product C should be eliminated.

Explanation / Answer

Product C should not be eliminated as it would result in a reduction in net income by $800.

Current Total Total If Difference: Net Operating Product C is dropped Income Increase or (Decrease) Sales revenue 100000 70000 -30000 Variable costs 60000 40000 20000 Contribution margin 40000 30000 -10000 Fixed expenses: Rent 5000 3500 1500 Depreciation 6000 6000 0 Utilities 4000 3300 700 Supervisors' salaries 5000 2000 3000 Maintenance 3000 2000 1000 Administrative expenses 10000 7000 3000 Total fixed expenses 33000 23800 9200 Net operating income (loss) 7000 6200 -800

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

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