CALCULATOR PRINTER VERSION BACK Exercise 199 (Part Level Submission) A recent ac
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Question
CALCULATOR PRINTER VERSION BACK Exercise 199 (Part Level Submission) A recent accounting graduate from Marvel State University evaluated the operating performance of Fanning Company's four divisions. The following presentation was made to Fanning's Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division stating that total net income would increase by $60,000. (See analysis below.) Other Three Southern Division Total 2,000,000 950,000 1,050,000 800,000 250,000 $480,000 2,480,000 1,350,000 1,130,000 940,000 Sales Cost of Goods Sold Gross Profit Operating Expenses Net Income 400,000 80,000 140,000 $ (60,000 For the other divisions, cost of goods old % vanable and operating expenses are 70% vanable. The cost of goods sold for the Southern the division is eliminated, only $15,000 of the fixed operating costs will be eliminated s on s 30% ed, and s operating expe es are 75% fi ed If Prepare the analysis for new accountant's recommendation. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter 0 for the amounts.) Net Income Increase (Decrease) Continue Eliminate ersion 4.24 oe 352 PM 3/21/2018 ere to searchExplanation / Answer
Answer
Continue
Eliminate
Net Income Increase (Decrease)
Sales
480,000
-
(480,000)
Variable Expenses
Cost of Goods Sold
280,000
(400,000 * 70%)
-
280,000
Operating Expenses
35,000
(140,000 * 25%)
-
35,000
Total Variable Expenses
315,000
-
315,000
Contribution Margin
165,000
-
(165,000)
Fixed Expenses
Cost of Goods Sold
120,000
(400,000 * 30%)
120,000
-
Operating Expenses
105,000
(140,000 * 75%)
90,000
(105,000 – 15,000)
15,000
Total Fixed Expenses
225,000
210,000
15,000
Net Income
(60,000)
(210,000)
(150,000)
If the Southern Division is closed then the net Income will decrease by $150,000
Continue
Eliminate
Net Income Increase (Decrease)
Sales
480,000
-
(480,000)
Variable Expenses
Cost of Goods Sold
280,000
(400,000 * 70%)
-
280,000
Operating Expenses
35,000
(140,000 * 25%)
-
35,000
Total Variable Expenses
315,000
-
315,000
Contribution Margin
165,000
-
(165,000)
Fixed Expenses
Cost of Goods Sold
120,000
(400,000 * 30%)
120,000
-
Operating Expenses
105,000
(140,000 * 75%)
90,000
(105,000 – 15,000)
15,000
Total Fixed Expenses
225,000
210,000
15,000
Net Income
(60,000)
(210,000)
(150,000)
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