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jeka94
3 years ago
14

ranfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,0

00. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:
Business
2 answers:
nata0808 [166]3 years ago
8 0

Answer:

The 40%  saving on fixed assets will increase Granfield overall operating income by $210,800

Explanation:

If Granfield discontinues it backpack division, below is the saving from fixed cost :

Avoidable fixed cost (40%)= 40% * $527,000

                                            =$210,800

The $210,800 saving will increase Granfield overall operating income.

The 60% balance of the fixed cost is a sunk cost and will not have any impact on the operating income.

Hence, a decision has to be made whether to continue with the segment $42,000 operating loss or discontinue the operation to have savings of $210,800.

Snowcat [4.5K]3 years ago
5 0

Answer:

If discontinued, then their operating income will decrease by 168,800

It is a better deal to continue the backpack division active.

Explanation:

sales                  960,000

variable cost    (475,000)

contribution      485,000

fixed cost          (527,000)

loss                     (42,000)

if Dropped

40% of fixed cost are unavoidable

527,000 x 40% = (210,800)

Difference: 42,000-210,800 = (168,800)

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During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of whi
andrew-mc [135]

Answer:

Absorption Costing Net Income  1008,000

Variable Costing Net Income     976,000

Explanation:

<u><em>Kodiak Fridgeration Company</em></u>

Units Produced = 80,000

Units Sold = 72,000

Ending Inventory = 8000

<u>Per Units Cost </u>

Direct materials $6,400,000/80,000 = $ 80

Direct labor 1,600,000 /80,000= $ 20

Variable manufacturing cost 1,280,000/80,000= $ 16

Fixed manufacturing cost 320,000 /80,000 = $ 4            

Absorption Manufacturing Cost  per unit= 9,600,000/80,000= $ 120

Variable Manufacturing Costs per unit = $ 116

<u><em></em></u>

<u><em>Kodiak Fridgeration Company</em></u>

<u><em>Income Statement </em></u>

<u><em>Absorption Costing</em></u>

<u>Sales                                                              $10,800,000 </u>

Manufacturing costs:

Direct materials $6,400,000

Direct labor 1,600,000

Variable manufacturing cost 1,280,000

Fixed manufacturing cost 320,000                 9,600,000

Less Ending Inventory (8000*120)                     (960,000)

<u>Cost of Goods Sold                                           86,40,000</u>

Gross Profit                                                         2160,000

Selling and administrative expenses:

Variable $ 72,000* 13.5=                                    972,000

Fixed                                                                      180,000                                                  

Net Income                                                        1008,000

<em><u>Kodiak Fridgeration Company</u></em>

<em><u>Income Statement </u></em>

<em><u>Variable Costing</u></em>

Sales                                                              $10,800,000

Variable manufacturing cost

(80,000*116)                                                       9280,000

Less Ending Inventory ( 8000*116)                     928,000

<u>Cost of Goods Sold                                           83,52,000</u>                  

Gross Contribution Margin                                 2448,000

Variable Selling and administrative expenses

(72000 * $1,080,000/80,000)                              972,000

Contribution Margin                                            1476,000

Less Fixed Expenses

Fixed manufacturing cost 320,000

Fixed 180,000                                                    500,000

Net Income                                                          976,000

3. The difference in absorption and variable costing income is because in absorption costing the fixed costs are treated as unit cost and in variable costs the fixed costs are treated as period costs. Also the fixed costs of the ending units is deducted in absorption costing where it is not deducted in variable costing.

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<u>Solution:</u>

The price per variable unit is set at 1.5 times the cost; the VC / unit is estimated at $2.50.

Price = 2.5 * 2.50 = $6.25

Variable cost = $2.50

Fixed cost = $220,000

Break-Even Volume = Fixed cost / (Price - Variable cost)

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Break-Even Volume = 58,667 units

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The "sticky wage" theory states that …
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Answer:

c. wages may stay at above-equilibrium levels for an extended period of time, thus keeping unemployment high.

Explanation:

Sticky wage theory -

According to this theory , the payment of the employees have a slow response for the change in the performance of the company or the economy .

From this theory , as the unemployment increases ,  the wages of the employed candidates tends to remain same or increases very slowly due to to decrease in the demand of the labor .

In this case , the wages are sticky - down , as they move up easily but get down with difficulty .

4 0
3 years ago
Plutonic Inc. had $400 million in taxable income for the current year. Plutonic also had an increase in deferred tax liabilities
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Answer:

Increase of 130 million

Explanation:

In this question, we are looking to evaluate what has happened to change in deferred tax assets. We proceed as follows;

Firstly, we calculate the current tax.

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This means that the change in deferred tax asset was an increase of 210 million- 80 million = $130 million

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