13.
Western Apparel Company owns two stores and management isconsidering eliminating the East store due to declining sales.Segmented contribution income statements are as follows and commonfixed costs are allocated on the basis of sales.
West
East
Total
Sales
$480,000
100,000
$580,000
Variable costs
262,500
55,000
315,500
Direct fixed costs
62,500
25,000
87,500
Segment margin
155,000
20,000
175,000
Allocated fixed costs
137,500
35,000
172,500
Net Income
$17,500
($15,000)
$ 2,500
Western feels that if they eliminate the East store that salesin the West store will decline by 25%. If they close the Eaststore, overall company net income will:
A)
decline by $90,000.
B)
decline by $85,625.
C)
decline by $74,375.
D)
decline by $63,500.
13. | Western Apparel Company owns two stores and management isconsidering eliminating the East store due to declining sales.Segmented contribution income statements are as follows and commonfixed costs are allocated on the basis of sales.
Western feels that if they eliminate the East store that salesin the West store will decline by 25%. If they close the Eaststore, overall company net income will: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A) | decline by $90,000. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B) | decline by $85,625. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C) | decline by $74,375. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D) | decline by $63,500. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related questions
1. Western Apparel Company owns two stores and management isconsidering eliminating the East store due to declining sales.Segmented contribution income statements are as follows and commonfixed costs are allocated on the basis of sales.
West | East | Total | |
Sales | $480,000 | 100,000 | $580,000 |
Variable costs | 262,500 | 55,000 | 315,500 |
Direct fixed costs | 62,500 | 25,000 | 87,500 |
Segment margin | 155,000 | 20,000 | 175,000 |
Allocated fixed costs | 137,500 | 35,000 | 172,500 |
Net Income | $17,500 | ($15,000) | $2,500 |
Western feels that if they eliminate the East store that salesin the West store will decline by 25%. If they close the Eaststore, overall company net income will:
Please show workingsâ¦â¦â¦â¦â¦â¦â¦.
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2. Maestro, a best-selling toy has a selling price of $15. Ifthe contribution margin ratio is 40% and if the fixed costs are$60,000, how many Maestros must the company sell to realize aprofit of $450,000?
Please show workingsâ¦â¦â¦â¦.
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3. Given a resource constraint, management should shift thefocus of cost-volume-profit analysis to:
A) Increasing labor productivity and reducing output.
B) The product with the lowest variable cost per sales dollar.
C) The contribution margin per unit of the constraint.
D) Decreasing the firmâs breakeven point by increasing the sellingprice.
