Vanik Corporation currently has two divisions which had the following operating

Question

Vanik Corporation currently has two divisions which had the following operating results for last year: Cork Rubber Sales Variable costs Contribution margin Traceable fixed costs Segment margin Allocated common corporate fixed costs Net operating income (loss) Division Division $600,000 $350,000 250,000 220,000 350,000 130,000 160,000 110,000 190,000 20,000 80,000 45, 000 $110,000 $(25,000) Because the Rubber Division sustained a loss, the president of Vanik is considering the elimination of this division. All of the division's traceable fixed costs could be avoided if the division was dropped. None of the allocated common corporate fixed costs could be avoided. If the Rubber Division was dropped at the beginning of last year, the financial advantage (disadvantage) to the company for the year would have been Multiple Choice ($20,000) $20,000 $25,000 ($25,000)

Explanation / Answer

First question: First option (25000)

By removing the segment, semgment contribution will be lost which gives a financial disadvantage of 20000

Second question: 1 variable selling cost is the only relevant cost.

since other costs are already incurred and cannot be avoided for this decision, only costs that will be incurred by selling them matters.

Third question: 4500 is correct

Fourth question: 19 is correct:

Fifth question: 38.5 per unit is correct:

only incremental costs of accepting the order are considered.

It incurs 38.5 per unit, at this price entity will be indifferent in accepting the order.

A Selling price 20.5 Relevant costs: Direct material 3.1 Direct labor 1.5 Variable OH 6.4 order related variable costs 5 B Variable costs 16 C=A-B Contribution margin 4.5 D=C*9000 Total contribution 40500 Less: incremental fixed costs 36000 Incremental income 4500

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.