17. Fans Hats, Inc. has two product lines-batting helmets and football helmets.
ID: 2580919 • Letter: 1
Question
17. Fans Hats, Inc. has two product lines-batting helmets and football helmets. The income statement data for the most product recent year is as follows Total-L-BattingHelmetl 850,000 Football Helmets $500,00 Sales reverue Variable costs Contribution margin Fixed costs Operating income (loss) $410,00 $350,000 $60,000 ? (Assume that fixed costs What is the efet of dropping foothall helimetsline on the operating income of the company remain unchanged and that there would be no adverse efect on other sales) A) Operating income will increase by $40,000. B) Operating income will increase by $90,000 C) Operating income will decrease by $60,000. D) Operating income will decrease by $350,000. 18. Which of the following would not be a factor in the consideration of whether or not a special order is accepted or not? A) Variable costs B) Avoidable fixed costs C) Sales price of the special order D) Unavoidable fixed costs E) 19. Which of the following statements is truel A) Companies are price-takers when their products are unique. B) Companies are price-setters for a product when there is intense competition C) Companies are price-takers for a product when the pricing approach emphasizes cost-plus pricing. D) Companies are price-takers when they have little or no control over the prices of their products or services 20. A depreciable asset's original cost is relevant when considering whether to replace the asset A) True B) FalseExplanation / Answer
Answer:-17)-The effect of dropping football helmets line on the operating income of the company :- Part C)- Opreating income will decrease by $60000.
Explanation:- After dropping the football helmets line fixed cost of the company remain unchanged ie Unavoidable cost.Hence fixed cost have no effect on the decision part. Hence company will loose contribution margin by $60000.
18)-The Unavoidable fixed (Part D) costs is a factor in a consideration of whether or not a special order is accepted or not.
Explanation:- Unavoidable fixed cost are those costs which are remain unchanged whether or not a special order is accepted. Hence these costs are not part of the decision making process.
19)-True- Companies are price-takers when they have little or no control over the price of their products or services.
Explanation:- Price-takers:- Little control over pricing.
Price setters:-More control over pricing.
20)-This statement is False. A depreciable assets original costs is not relevant when considering whether to replace the asset.
Explanation:- A depreciable assets original cost is a sunk cost for considering whether to replace the asset hence no relevancy for decision making.
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