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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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Results are below.

Explanation:

<u>First, we need to calculate the total unitary variable cost:</u>

Direct materials= 10

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Total unitary variable cost= $22

<u>Now, the contribution margin income statement:</u>

Sales= 5,000*38= 190,000

Total variable cost= 22*5,000= (110,000)

Total contribution margin= 80,000

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Fixed Selling and administrative= (15,000)

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3 years ago
Darla owns a dress shop called Darla's Darling Dresses. During the past year, Darla sold some assets to upgrade her facility. Sh
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Answer:

Darla's amount realized on the sale is $800

Adjusted basis in the assets sold is $300

Producing a realized gain on the sale of $500

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Amount realized = cash received + FMV of other property + buyer’s assumption of seller’s liabilities – seller’s expenses

Amount realized = 600 + 200 + 0 -0

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Adjusted basis = initial basis – cost recovery deductions

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