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Dahasolnce [82]
3 years ago
7

The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are​ unavoidable,

if Karlson drops product line F and rents the space formerly used to produce product F for per​ year, total operating income will be
Business
2 answers:
zloy xaker [14]3 years ago
6 0

Answer:

$65,000

Explanation:

a lot of information is missing, so I looked at a similar question to fill in the blanks:

                                         product D      product E      product F

Sales revenue                   $90,000        $50,000       $30,000

Variable costs                   (40,000 )        (10,000 )        (11,000 )

Contribution margin         $50,000        $40,000        $19,000

Fixed costs                        (10,000 )        (10,000 )       (24,000 )

Operating income (loss)   $40,000        $30,000       ($5,000 )

product F's facilities can be rented for $19,000

net unavoidable fixed costs = $19,000 - $24,000 = ($5,000)

                                         product D      product E      product F

Sales revenue                   $90,000        $50,000        

Variable costs                   (40,000 )        (10,000 )        

Contribution margin         $50,000        $40,000        

Fixed costs                        (10,000 )        (10,000 )      

Operating income (loss)   $40,000        $30,000       ($5,000 )

total income = $40,000 + $30,000 - $5,000 = $65,000

MatroZZZ [7]3 years ago
6 0

one word: danidev reeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

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Cryo-vac expects sales to increase 20% next year from the current level of $5,000,000. The firm has current assets of $1,000,000
MAVERICK [17]

Answer:

Consider the following calculations

Explanation:

Current Sales Level = $ 5000000 and Expected Sales Growth Rate = 20 %

Next Year Sales = 5000000 x 1.2 = $ 6000000

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Expected Dividend Payout = $ 200000

Increase in Retained Earnings = Expected Profit - Expected Dividend Payout = 480000 - 200000 = $ 280000

An increase in retained earnings such as the aforementioned unbalances the asset, liability, equity equation and hence, some of the asset-liability items need to change so as to rebalance the equation. The items that usually change are the current assets, fixed assets, and current liabilities except for the current portion of the firm's long-term debt as the same is a function of the firm's financing activities, whereas increment in the sale and consequent increment in other balance sheet items are operating activities.

Further, it is assumed that the current assets and current liabilities less notes payable (it is a short-term financing instrument and hence remains unchanged) all increase at the same rate as sales increment. Fixed Assets although increase to support higher sales level, but are part of the firm's investing activities and hence do not bear a direct proportional relationship with the increase in sales.

Change in Current Asset = (1.08 x 1000000) - 1000000 = $ 80000

Change in Fixed Assets = 300000 (already mentioned)

Change in Current Liabilities less Notes Payable = (750000 - 300000) x 1.08 - (750000 - 300000) = $ 36000

Therefore, Additional Financing Required = Change in Current Assets + Change in Fixed Assets - Change in Current Liabilities less Notes Payable - Increment in Retained Earnings = 80000 + 300000 - 36000 - 280000 = $ 64000

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