1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Virty [35]
3 years ago
13

Suire Corporation is considering dropping product D14E. Data from the company's accounting system appear below: Sales $740,000 V

ariable expenses $341,000 Fixed manufacturing expenses $257,000 Fixed selling and administrative expenses $205,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $199,500 of the fixed manufacturing expenses and $114,500 of the fixed selling and administrative expenses are avoidable if product D14E is discontinued. a. According to the company's accounting system, what is the net operating income earned by product D14E? (Net losses should be indicated by a minus sign.) b. What would be the financial advantage (disadvantage) of dropping product D14E? Should the product be dropped?
Business
2 answers:
MissTica3 years ago
6 0

Answer:

See explanation.

Explanation:

In order to find the profitability of D14E we only calculate relevant costs which are incremental and thus can be avoided if D14E was not produced. However as the system allocates complete costs we will take the allocated costs for the first part.

1)

Sales                           $740,000

Less:

Variable expenses      $341,000

Fixed Manufacturing    $257,000

Fixed Selling                 $205,000

Loss as/ system            $ -63,000

2)

First we see if the product D14E has positive contribution to fixed costs,

Contribution = Revenue - Variable costs

Contribution D14E = 740,000 - 341,000 = $399,000

The contribution is positive so now we compare it to avoidable fixed costs,

Total Advantage forgone = Contribution - avoidable fixed costs

Advantage forgone = 399,000 - 199,500 - 114,500 = $85,000

Since the product covers all its variable cost and provides a positive contribution even after covering avoidable fixed costs, it should not be dropped as it would be a disadvantage of revenue forgone by $85,000.

Hope that helps.

iogann1982 [59]3 years ago
3 0

Answer:

a, NET OPERATING INCOME EARNED BY PRODUCT D14E

                                                                                     $

Sales                                                                       740,000                                                                                

Less: variable expenses                                         <u>341,000</u>

Contribution                                                             399,000

Less: Fixed manufacturing expenses                     <u>257,000</u>

Less:Fixed selling and administrative expenses  <u>205,000 </u>                                                                                                                                        

Net operating income                                              <u>(63,000)</u>  

b. If product D14E is dropped, the operating income of the company reduces by $85,000

c. NET CONTRIBUTION OF PRODUCT D14E

                                                                                                     $

    Sales                                                                                   740,000

    Less: variable cost                                                             <u>341,000</u>

    Contribution                                                                        399,000

    Less: Avoidable fixed manufacturing cost                        199,500

        Avoidable fixed selling and  administrative expenses  <u>114,500</u>

       Net contribution                                                                <u> 85,000</u>

The product should not be dropped because it has a positive net contribution.

Explanation:

This question relates to a decision on whether or not to drop a  product or segment. In the first part of the question, there is need to determine the net operating income ,which is a function  of sales less total cost.

The second part of the question focuses on the financial implication         of dropping product D14E.  Dropping the product will reduce the net operating income of the company by $85,000.

The third part of the question relates to whether or not the product should be dropped. In this case, we need to determine the net contribution of the product. Net contribution is obtained by the excess of sales over variable cost and avoidable fixed cost. Since the net contribution  of the product is positive, it implies that the product should not be dropped.                                                                                                              

You might be interested in
If a term in a contract is ambiguous, the court will consider the parties'
Tpy6a [65]

Answer:

intent

Explanation:

8 0
2 years ago
Typical Corp. reported a deferred tax liability of $6,000,000 for the year ended December 31, 2017, when the tax rate was 40%. T
Alex_Xolod [135]

Answer:

Income tax expense (Balancing figure) $13,200,000  

          To Deferred tax liability (8% × $15,000,000)  $1,200,000

          To Income tax payable ($30,000,000 × 40%)  $12,000,000

(Being the income tax expense is recorded)

Explanation:

The compound journal entry is shown below:

Income tax expense (Balancing figure) $13,200,000  

          To Deferred tax liability (8% × $15,000,000)  $1,200,000

          To Income tax payable ($30,000,000 × 40%)  $12,000,000

(Being the income tax expense is recorded)

For recording this, we debited the income tax expense as it increased the expenses and at the same time it also increased the liabilities i.e deferred tax liability and income tax payable so it would be credited

6 0
3 years ago
Exercise 7-29 (LO. 6) Tim, a single taxpayer, operates a business as a single-member LLC. In 2018, his LLC reports business inco
Taya2010 [7]

Answer:

From 2018, there is a threshold limit of $250,000 defined by IRS for single:

(a) Tim has an excess business loss:

= Business loss - Threshold

= $350,000 - $250,000

= $100,000

(b) Tim may use $250,000 of the $350,000 LLC business loss to offset non business income.

The excess business loss is treated as the portion of the Tim's NOL carry forward.

Excess business loss of $100,000 will be treated as the NOL carryforward to subsequent years.

4 0
2 years ago
Which one of the following statements concerning venture capital financing is incorrect? Multiple Choice Venture capitalists des
ziro4ka [17]

Answer:

The incorrect statement about Venture capitalists is:

Venture capitalists usually assume active roles in the management of the financed firm.

Explanation:

Venture capitalists are high net worth individuals with managerial competence or experience seeking for new businesses to invest in. In exchange, they ask for an equity stake in the company they finance.

Venture capital financing is the type of funds that are given to invested into viable businesses in their budding stage by investors that see long term growth potential in them. it is a form of private equity.

Venture Capitalist never assume active roles in the management of the financed firm. however, if they have the technical know how, they may pitch in passively from time to time to advice.

3 0
2 years ago
Fiscal policy is defined as changes in federal ________ and ________ to achieve macroeconomic objectives such as price stability
wariber [46]

Answer:

expenditures and taxes

Explanation:

Fiscal policy refers to a government action to adjust taxes and expenditures to influence economic growth. Taxes are the main sources of income for the government. A rise in taxes increases revenue to the government but lower individual disposable income. High taxes discourage investments and business expansion.

Government expenditure in infrastructure and other projects creates employment and incomes in the economy. Reduced spending by the government may result in a lower aggregate demand. The government uses fiscal policies together with monetary policies to achieve its economic goals.

5 0
3 years ago
Other questions:
  • In the statement of cash flows, inflows and outflows of cash from buying and selling trading securities typically are considered
    6·1 answer
  • You are interested in buying a piece of land overlooking the sea. You find a place atop a 50m high sea cliff. The lot is only ab
    5·1 answer
  • Kota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is i
    12·1 answer
  • A ________ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and cap
    8·2 answers
  • The first step marketers should take when deciding how best to position their product is to
    11·1 answer
  • An exclusion of all products from certain countries or companies by a government or group is called a(n):
    13·1 answer
  • Marigold Corporation had net sales of $2,423,800 and interest revenue of $36,500 during 2020. Expenses for 2020 were cost of goo
    11·1 answer
  • Strategic use of white space improves document readability. Which of the following techniques employ white space?
    10·1 answer
  • An FI purchases at par value a $100,000 Treasury bond paying 10 percent interest with a 7.5 year duration. If interest rates ris
    11·1 answer
  • The phrase gains from trade refers to the: increase in total output that is realized when individuals specialize in particular t
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!