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victus00 [196]
3 years ago
15

Fabio Corporation is considering eliminating a department that has a contribution margin of $39,000 and $78,000 in fixed costs.

Of the fixed costs, $19,500 cannot be avoided. The effect of eliminating this department on Fabio's overall net operating income would be:
Business
1 answer:
OleMash [197]3 years ago
7 0

Answer:

a decrease of $39,000.

an increase of $39,000.

a decrease of $19,500.

an increase of $19,500.

The correct option is the last one,an increase of $19,500

Explanation:

The impact on net operating income when the department is eliminated in Fabio Corporation is the company would lose the contribution margin of $39,000 and avoidable fixed cost,hence overall effect of the elimination is the difference between the contribution margin lost and the avoidable fixed costs which is computed thus:

Lost contribution margin   $39000

Unavoidable fixed cost   $19,500

Total fixed costs

avoidable fixed cost=$78,000-$19,500=$58,500

decrease in overall  net operating income=$58,500-$39,000=$19,500

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Solution:

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Multiply the sales price by either the number of units sold to determine overall revenue.

The total income amounts to 2 dollars (price) and 400 more (bread loaves sold).

Therefore, the total income is $800.

b. What is its total cost?

Multiply increasing variable usage (the number of units used) by input price and add both values together to measure total costs.

Total cost equals 10 × $20 (cost of labor) + 7 × $60 (cost of land) + 4 × $40 (cost of capital) + 3 × $20 (cost of entrepreneurial ability) = $840.

c.Calculate the amount of economic profit or loss.

For this operation, benefit / loss is equal to total revenue less overall cost. In this case, profit / loss is equivalent to $800 (total income) minus $840.

If the total income equals the total cost, the corporation will profit; but, if the total cost exceeds the total income, the company will have a loss.

d. Will it continue to produce banana bread?

The company will keep producing banana bread if it receives fine, with zero economic profit.

However, the firm can stop producing banana bread if it loses money (when its total cost equals its total revenue).

e. If this firm's situation is typical for the other makers of banana bread, will resources flow toward or away from this bakery good?

If the product has contributed in a positive way, other businesses or individuals are going to want to make banana bread. Therefore, resources are going to pour into this good bakery. With the economic loss, money must disburse this pastry commodity, when companies or individuals would leave the market so that the loss could not be prevented. When economic profit is negative, no change occurs, as no new companies enter the market, no companies leave. There is no change.

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3 years ago
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One reason why a blanket obligation for all employees to obey their employers no matter what is unreasonable is that the choice
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Answer:TRUE

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3 0
3 years ago
Service employees are important to customers and competitive positioning because the front line ________________.
galben [10]

Answer:

A) is the most visible part of the firm.

Explanation:

The importance of service employees is that they are the ones that actually deal with the company's customers. If service employees don't deal properly with the clients, then no matter how good the company's products are, the customers will not be satisfied or happy.

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8 0
3 years ago
Eve's Apples opened for business on January 1, 2018, and paid for two insurance policies effective that date. The liability poli
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Answer: 18,000

Explanation:

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Insurance\ expense\ per\ month=\frac{Prepaid\ Insurance\ for\ liability\ policy}{Period\ of\ policy}

Insurance\ expense\ per\ month=\frac{36,000}{18}

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Insurance expense 2018:

= No. of months from 1 Jan 2018 to 31 Dec 2018 × Insurance expense per month

= 12 × 2,000

= 24,000

Prepaid insurance balance for liability policy on 31 Dec, 2018:

= Prepaid Insurance for liability policy - Insurance expense 2018

= 36,000 - 24,000

= 12,000

Crop damage policy:

Insurance\ expense\ per\ month=\frac{Prepaid\ Insurance\ for\ crop\ damage\ policy}{Period\ of\ policy}

Insurance\ expense\ per\ month=\frac{12,000}{24}

                                                            = 500

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= No. of months from 1 Jan 2018 to 31 Dec 2018 × Insurance expense per month

= 12 × 500

= 6,000

Prepaid insurance balance for crop damage policy on 31 Dec, 2018:

= Prepaid Insurance for crop damage policy - Insurance expense 2018

= 12,000 - 6,000

= 6,000

Therefore,

Total prepaid insurance balance on 31 Dec 2018:

= Prepaid insurance balance for liability policy on 31 Dec, 2018 + Prepaid insurance balance for crop damage policy on 31 Dec, 2018

= 12,000 + 6,000

= 18,000

7 0
3 years ago
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