The condensed income statement for a company for the past yearis as follows:
Product
F
G
H
Total
Sales
$200,000
$180,000
$320,000
$700,000
Less Variable Costs:
120,000
160,000
200,000
480,000
Contribution Margin
$80,000
$20,000
$120,000
$220,000
Less Fixed Costs
25,000
30,000
40,000
95,000
Income (loss) from operation
$55,000
($10,000)
$80,000
$125,000
Management is onsidering the discontinuance of the manufactureand sale of Product G at the beginning of the current year.
The discontinuance would have no effect on the total fixed costsand expenses of the sales of Products F and H.
What is the amount of change in the net income for thecurrent year that will result from the discontinuance of ProductG?
The condensed income statement for a company for the past yearis as follows:
Product | ||||
F | G | H | Total | |
Sales | $200,000 | $180,000 | $320,000 | $700,000 |
Less Variable Costs: | 120,000 | 160,000 | 200,000 | 480,000 |
Contribution Margin | $80,000 | $20,000 | $120,000 | $220,000 |
Less Fixed Costs | 25,000 | 30,000 | 40,000 | 95,000 |
Income (loss) from operation | $55,000 | ($10,000) | $80,000 | $125,000 |
| Management is onsidering the discontinuance of the manufactureand sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costsand expenses of the sales of Products F and H. What is the amount of change in the net income for thecurrent year that will result from the discontinuance of ProductG? | ||||
Related questions
| Financial Information for Case9-1 | |||
| Industy Wide | |||
| Balance Sheets | |||
| Years Ended December 31, 2014and 2015 | |||
| 2015 | 2014 | ||
| Assets | |||
| Current Assets: | |||
| Cash | $ 30,000 | $ 25,000 | |
| Accounts receivable | 110,000 | 90,000 | |
| Inventories | 100,000 | 80,000 | |
| Total Current Assets | 240,000 | 195,000 | |
| Fixed Assets; | |||
| Plant and equipment | 250,000 | 220,000 | |
| Less accumulated depreciation | (100,000) | (65,000) | |
| Land | 50,000 | 50,000 | |
| Total Fixed Assets | 200,000 | 205,000 | |
| Total Assets | $ 440,000 | $ 400,000 | |
| Liabilities and Equity | |||
| Current Liabilities: | |||
| Accounts payable | $ 58,000 | $ 50,000 | |
| Notes payable-due within one year | 50,000 | 50,000 | |
| Accrued liabilities | - | - | |
| Total Current Liabilities | 108,000 | 100,000 | |
| Long Term Liabilities | 32,000 | 20,000 | |
| Total Liabilities | 140,000 | 120,000 | |
| Stockholders' Equity: | |||
| Common stock | 100,000 | 100,000 | |
| Retained earnings | 200,000 | 180,000 | |
| Total Stockholders' Equity | 300,000 | 280,000 | |
| Total Liabilities and Equty | $ 440,000 | $ 400,000 | |
| Industry Wide | |||
| Income Statement | |||
| Years Ended December 31, 2014and 2015 | |||
| Revenues | $ 1,100,000 | $ 1,000,000 | |
| Cost of goods sold | (700,000) | (650,000) | |
| Gross margin | 400,000 | 350,000 | |
| Operating expenses | (275,000) | (255,000) | |
| Operating income | 125,000 | 95,000 | |
| Interest expense | (15,000) | (15,000) | |
| Income before taxes | 110,000 | 80,000 | |
| Income taxes | (44,000) | (32,000) | |
| Net income | $ 66,000 | $ 48,000 | |
| Financial Information for Case9-1 | |||
| Industy Wide | |||
| Balance Sheets | |||
| Years Ended December 31, 2014and 2015 | |||
| 2015 | 2014 | ||
| Assets | |||
| Current Assets: | |||
| Cash | $ 30,000 | $ 25,000 | |
| Accounts receivable | 110,000 | 90,000 | |
| Inventories | 100,000 | 80,000 | |
| Total Current Assets | 240,000 | 195,000 | |
| Fixed Assets; | |||
| Plant and equipment | 250,000 | 220,000 | |
| Less accumulated depreciation | (100,000) | (65,000) | |
| Land | 50,000 | 50,000 | |
| Total Fixed Assets | 200,000 | 205,000 | |
| Total Assets | $ 440,000 | $ 400,000 | |
| Liabilities and Equity | |||
| Current Liabilities: | |||
| Accounts payable | $ 58,000 | $ 50,000 | |
| Notes payable-due within one year | 50,000 | 50,000 | |
| Accrued liabilities | - | - | |
| Total Current Liabilities | 108,000 | 100,000 | |
| Long Term Liabilities | 32,000 | 20,000 | |
| Total Liabilities | 140,000 | 120,000 | |
| Stockholders' Equity: | |||
| Common stock | 100,000 | 100,000 | |
| Retained earnings | 200,000 | 180,000 | |
| Total Stockholders' Equity | 300,000 | 280,000 | |
| Total Liabilities and Equty | $ 440,000 | $ 400,000 | |
| Industry Wide | |||
| Income Statement | |||
| Years Ended December 31, 2014and 2015 | |||
| Revenues | $ 1,100,000 | $ 1,000,000 | |
| Cost of goods sold | (700,000) | (650,000) | |
| Gross margin | 400,000 | 350,000 | |
| Operating expenses | (275,000) | (255,000) | |
| Operating income | 125,000 | 95,000 | |
| Interest expense | (15,000) | (15,000) | |
| Income before taxes | 110,000 | 80,000 | |
| Income taxes | (44,000) | (32,000) | |
| Net income | $ 66,000 | $ 48,000 | |
1. Calculate the current ratio and average collection period foraccounts receivable, inventory turnover, gross margin percentage,and return on equity for 2014 and 2015 for the JordanCorporation.
2. Calculate the current ratio and average collection period foraccounts receivable, inventory turnover, gross margin percentage,and return on equity for the Industry.
3. Compare the performance of the Jordan Corporation between2014 and 2015 and comment on the trend of each ratio.
4. Compare the performance of the Jordan Corporation in 2015 tothe industry averages and comment on each.
