7, Alta Loma Industries has three product lines, A, B, and C. The following info

Question

7, Alta Loma Industries has three product lines, A, B, and C. The following information is available: Sales Variable costs Contribution margin Traceable fixed costs $100,000 76,000 $24,000 2,000 $90,000 $36,000 27.000 $9,000 3,000 $6,000 8.400 48,000 $42,000 27000 Segment mard costs (allocat.000 $15,000 6,000 $15,000 $9.000 $6.000 2400) The company thinks it can eliminate product line C and double its production and sales of product line B. There is enough Common fixed costs (allocated) Operating income 9,000 capacity to double the production and sales of product line B without increasing th e current fixed costs. If these changes are made, the total operating income of Alta Loma Industries will increase by how much? a. $18,000 b. $42,000 c. $24,000 d. $19,000 e. $36,000 https://www.coursehero.com/file/26201 55S/ACC-2203-2014-Final-Version-E-Part-2pdt

Explanation / Answer

7.

Answer : e

Current operating income = 9000 + 6000 + (2400)

= $12600

Revised operating income = Segment margin of A + Segment margin of B - Total common fixed costs

= 15000 + [(contribution margin * 2) - Traceble fixed costs of B ] - (6000 + 9000 + 8400)

= 15000 + [ (42000*2) - 27000] - 23400

= 15000 + 57000 -23400

= $48600

Increase in operating income = $48600- $12600

= $36000

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

---

---

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