When $25,000 of fixed costs will be eliminated by discontinuing, the operating income will increase by $5000.
<h3>How to calculate the operating income?</h3>
From the complete information given, the impact on operating income will be calculated thus:
= Savings fixed cost - Loss on contribution margin
= $25000 - $20000
= $5000
Therefore, the operating income will increase by $5000.
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Answer:
The correct answer is: the actual price is higher than equilibrium price.
Explanation:
With a downward sloping demand curve and upward-sloping supply curve, excess supply means that the supply is more than quantity demanded. The actual price is higher than the equilibrium price level.
We are aware that price and supply are directly related, so the firms will supply more at a higher price. But price and quantity demanded are inversely related, so at higher price, the consumers will demand less quantity of the product.
Thus excess supply is created in the market at a price higher than the equilibrium price.
Answer:
Contribution margin ratio = 20%
Explanation:
We know, contribution margin is the difference between sales revenue and variable expenses, while the contribution margin ratio expressed as a parentage between the contribution margin and company sale.
We know,
contribution margin ratio = (contribution margin ÷ sales revenue) × 100
Given,
Contribution margin = $17,600
sales revenue = $88,000
Putting the value into the formula, we can get
contribution margin ratio = ($17,600 ÷ $88,000) × 100
or, contribution margin ratio = 0.2 × 100
Contribution margin ratio = 20%
Answer:
D. $605,500
Explanation:
The computation of the expected balance in retained earnings on the 2018 is shown below:
The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid
= $533,500 + $112,000 - $40,000
= $605,500
We simply applied the above formula so that the ending balance could arrive by considering all the items given in the question
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