1.Superior Gaming, a computer enhancement company, has three product lines: audi
ID: 2376698 • Letter: 1
Question
1.Superior Gaming, a computer enhancement company, has three product lines: audio enhancers, video enhancers, and connection-speed accelerators. Common costs are allocated based on relative sales. A product line income statement for the year ended December 31, 2011 follows:
Audio
Video
Accelerators
Total
Sales
$1,045,000
$2,255,000
$2,200,000
$5,500,000
Less COGS
575,000
1,240,000
1,870,000
3,685,000
Gross margin
470,000
1,015,000
330,000
1,815,000
Less other var costs
53,000
69,000
20,000
142,000
Contribution margin
417,000
946,000
310,000
1,673,000
Less direct salaries
155,000
175,000
65,000
395,000
Less common fixed costs:
Rent
11,970
25,830
25,200
63,000
Utilities
4,370
9,430
9,200
23,000
Depreciation
5,890
12,710
12,400
31,000
Other admin costs
79,230
170,970
166,800
417,000
Net income
$160,540
$552,060
$31,400
$744,000
Since the profit for accelerators is relatively low, the company is considering dropping this product line. What is the incremental effect of dropping accelerators?
2.Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina%u2019s business segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if a segment is dropped.
Hospital Supplies
Retail Stores
Mail Order
Sales
$120,000
$440,000
$360,000
Variable costs
64,000
200,000
140,000
Contribution Margin
56,000
240,000
220,000
Direct Fixed Costs
50,000
80,000
90,000
Allocated common fixed costs
20,000
70,000
60,000
Net Income
($ 14,000)
$ 90,000
$ 70,000
If hospital supplies are dropped, what would happen to profit?
3.Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina%u2019s business segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if a segment is dropped.
Hospital Supplies
Retail Stores
Mail Order
Sales
$120,000
$440,000
$360,000
Variable costs
64,000
200,000
140,000
Contribution Margin
56,000
240,000
220,000
Direct Fixed Costs
50,000
80,000
90,000
Allocated common fixed costs
20,000
70,000
60,000
Net Income
($ 14,000)
$ 90,000
$ 70,000
Assume that if hospital supplies were dropped, retail store sales would increase by 25%. What would the impact on overall profitability be if the %u201CHospital Supplies%u201D segment is eliminated?
PLEASE SHOW WORK FOR ALL QUESTIONS! THANKS!
Audio
Video
Accelerators
Total
Sales
$1,045,000
$2,255,000
$2,200,000
$5,500,000
Less COGS
575,000
1,240,000
1,870,000
3,685,000
Gross margin
470,000
1,015,000
330,000
1,815,000
Less other var costs
53,000
69,000
20,000
142,000
Contribution margin
417,000
946,000
310,000
1,673,000
Less direct salaries
155,000
175,000
65,000
395,000
Less common fixed costs:
Rent
11,970
25,830
25,200
63,000
Utilities
4,370
9,430
9,200
23,000
Depreciation
5,890
12,710
12,400
31,000
Other admin costs
79,230
170,970
166,800
417,000
Net income
$160,540
$552,060
$31,400
$744,000
Explanation / Answer
Hi,
Please find the answer as follows;
Part 1:
Answer is (245000)
Part 2:
Answer is Decreae by 6000
Part 3:
Income from Retail Stores after increase of 25%
Net Change = 150000 - 90000 (Original Income from Retail Stores) - 6000 ( Decrease in Income resulting from discontinuance of Hospital Stores) = 54000
Answer is Income would increase by 54000
Thanks.
Continue Eliminate Net Income (increase or decrease) Contribution Margin 3,10,000 0 -3,10,000 Direct Salaries 65,000 0 65,000 Total 2,45,000 0 -2,45,000
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