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Luden [163]
3 years ago
13

Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’s most recent monthly contribution fo

rmat income statement follows:Department Total Hardware LinensSales $ 4,220,000 $ 3,020,000 $ 1,200,000Variable expenses 1,241,000 836,000 405,000Contribution margin 2,979,000 2,184,000 795,000Fixed expenses 2,260,000 1,390,000 870,000Net operating income(loss) $ 719,000 $ 794,000 $ (75,000 )A study indicates that $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 13% decrease in the sales of the Hardware Department.Required: If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?
Business
1 answer:
Romashka [77]3 years ago
5 0

Answer:

If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?

There will be a negative impact in the operating income equal to -$693,600 .

Explanation:

The scenario with the company fully operational is detailed below:

Hardware        Linens      Total Income Statement

$ 3,020,000    $ 1,200,000 $ 4,220,000 Total Net Sales

-$ 836,000      -$ 405,000 -$ 1,241,000 Variable Cost

$ 2,184,000      $ 795,000 $ 2,979,000 Operating Income

-$ 1,390,000     -$ 870,000 -$ 2,260,000 Direct Fixed Costs

$ 794,000       -$ 75,000 $ 719,000 Net Operating Income

If the company dropped the Linens Department the resault are as follows:

Hardware Linens             Total        Income Statement

$ 2.627,400 $ 0,000    $ 2.627,400 Total Net Sales

-$ 836,000 $ 0,000    -$ 836,000 Variable Cost

$ 1.791,400 $ 0,000   $ 1.791,400 Operating Income

-$ 1.390,000 -$ 376,000 -$ 1.766,000 Direct Fixed Costs

$ 401,400 -$ 376,000 $ 25,400 Net Operating Income

  • The new operating Income it's $25,400 , which means a decrease in operating income aproximately of $-693,600

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3 years ago
Suppose a small business has sales of $15,000 this month, with future sales expected to grow by $1,600 each month. Costs consist
liraira [26]

Answer:

$8,220

Explanation:

According to the scenario, computation of the given data are as follow:-

This month Sales = $15,000

Growth expect in future sales per month = $1,600

Next Month Sales  = Current Month Sales + Growth Expect In Future Sales Per Month

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Gross Profit = Sales - Fixed Cost - Variable Cost

                                            Per Month Gross Profit

Particular  Month 1  Month  2 Month  3 Month  4 Month  5 Month  6 Month  7

Sales ($) 16,600 18,200 19,800 21,400 23,000 24,600 26,200

Less - Fixed cost($) 7,500 7,500 7,500 7,500 7,500 7,500 7,500

Less-Variable cost ($) 6,640 7,280 7,920 8,560 9,200 9,840 10,480

Gross profit ($) 2,460 3,420 4,380 5,340 6,300 7,260 8,220

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Marketing manager Ricki Stephens reviewed her marketing information system to learn who was buying her company's products and at
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Answer:

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2 years ago
An investor owns 5,000 shares of IBM stock, $105 per share. He thinks that there is no large rise and possible drop in price. Th
lutik1710 [3]

Answer:

If IBM stock price rises from $105 to $112, the profit associated with the passive strategy is $ 35,000 and the profit associated with the covered call writing strategy is $ 45,000 .

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Shares = 5000

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Spot Price = $112

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Hence Net Profit = Premium received - $10,000 = $20,000 - $10,000

= $ 10000

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= $35,000 + $10,000

= $ 45,000

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