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olga_2 [115]
3 years ago
5

Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three

months of information for Model AE2 are summarized below: Sales (1,000 units) $300,000 Manufacturing costs: Direct materials 150,000 Direct labor ($15 per hour) 60,000 Overhead 100,000 Operating loss ($10,000) Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value. If Model AE2 is dropped from the product line, operating income will:
Business
1 answer:
SpyIntel [72]3 years ago
3 0

Answer:

It will decrease by $20,000.

Explanation:

In this exercise the resolution is:

$300,000 –$150,000 –$60,000 –$70,000 = $20,000  

This product contributes $20,000 toward corporate profits, therefore, discontinuing this product will decrease operating income by $20,000.

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Answer:

$510,130

Explanation:

Costs can be classified into two categories: Product Costs and Period Costs. Product costs are the manufacturing costs that are incurred in the production of goods and services. Under absorption costing, product costs include direct materials, direct labor, indirect materials, indirect labor, and other factory overhead. These costs are capitalized and expensed out when related goods and services are sold out.

On the other hand, period costs are selling & administrative expenses. These costs are never capitalized and expensed out in the statement of profit or loss as soon as incurred. Examples of period costs are advertisement expenses, depreciation expenses (not related to factory), sales commissions, administrative salaries and wages.

<u>Calculation of Period Costs</u>

Advertising costs                                                           $12,000

CEO's salary                                                                  460,000

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Administrative wages and salaries                                 36,900

Total Period Costs                                                        $510,130

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3 years ago
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Explanation:

A person's willingness-to-pay refers to the maximum price they would be want to pay for a good or service. For instance, if you refused to pay more than $25 for a jar of honey, your willingness-to-pay for the jar of honey is $25.

In this scenario, MusicLover will buy the headset if they are $195 but not if they are $210. His willingness to pay is therefore between $195 and $210. From the options, the only figure in that range is option B with $200.

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