Delicious Desserts is thinking about ending the production of two types of ice cream. Financial data related to the products is provided below: Rum Raisin Blue Moon
Sales $680,000 $573,000
Variable expenses 246,000 219.000
Fixed expenses 468,000 364,000
If Delicious stops making Rum Raisin ice cream, it estimates it can eliminate 75% of the fixed costs associated with that product. Similarly, if it stops making Blue Moon, it estimates it can eliminate 70% of the fixed costs associated with that product.
Given these figures, which of the following statements is true?
A) Delicious would be worse off if it discontinues Rum Raisin and would be better off if it discontinues Blue Moon.
B) Delicious would be better off if it discontinues Rum Raisin and would be worse off if it discontinues Blue Moon.
C) Delicious would be better off if it discontinues both products.
D) Delicious would be worse off if it discontinues either product.
Answers
Answer:
The correct choice here is A)
Delicious would be worse off if it discontinues Rum Raisin and would be better off if it discontinues Blue Moon.
Explanation:
Lets look at the figures:
Step I
Calculate the Total Costs for each product.
Total Cost (TC) = Fixed Cost + Variable Cost
TC for Rum Raisin =
$246,000+ $468,000
= $714,000
TC for Blue Moon =
$219,000 + $ 364,000
= $ 583 000
Step II
The business estimates that it can eliminate it's Fixed cost to a certain degree. Lets look at each before we make a decision.
New TC for each business is given as below:
New TC for Rum Raisin if 75% of Fixed Cost is eliminated =
$246,000+ ($468,000 x 25%)
= $246,000 + $117,000
New TC for Rum Raisin Ice Cream = $363,000
New TC for Blue Moon if 70% of it's Fixed Cost is removed =
$246,000+ ($468,000 x 30%)
= $246,000 + $140,400
New TC for Blue Moon Ice Cream = $386,400
The company Delicious is better off eliminating the product with the highest TC all other factors remaining accounted for and taken into consideration.
The product which must go is Blue Moon Ice Cream.
Cheers!
Related Questions
g The market supply curve in the short run is _______. A. horizontal at the shutdown price and upward sloping at prices above the shutdown point B. an upward-sloping curve that shows that as the market price rises the quantity supplied increases C. the same as the horizontal sum of the firms' marginal cost curves D. the same as the average total cost curve for the entire ind
Assuming the cost of direct materials used is $1,500,000, compute the total manufacturing costs using the information below. Raw materials inventory, January1 $ 30,000 Raw materials inventory, December 31 60,000 Work in process, January 1 27,000 Work in process, December 31 18,000 Finished goods, January 1 60,000 Finished goods, December 31 48,000 Raw materials purchases 1,500,000 Direct labor 690,000 Factory utilities 225,000 Indirect labor 75,000 Factory depreciation 500,000 Operating expenses 630,000.
"Jefferson Sports Medicine, Inc., offers two types of physical exams for students : the basic physical and the extended physical. The charge for the basic physical is $60, while the charge for the extended physical is $135 . Jefferson expects to perform 220 basic physicals and 190 extended physicals in July, 235 basic and 200 extended in August, and 105 basic and 110 extended in September . Prepa re the sales budget for the service revenue expected from the physical exams performed for the second quarter (July through September}, with a column for each month and for the quarter in total."
Employees in the Agriculture, Food, and Natural Resources career cluster workA. mostly inside in an office.B. outside sometimes.C. on construction sites.D. on a sales floor.
Answers
Answer:
Net Income = $ 1.05 million; you can calculate the amount using the profit margin which will be the 7% from the sales.
ROE = 19.8%, the formula is Net Income/Owners Equity. To obtain the amount for Owners Equity you can use the information provided using the Assets and the Total Debt, the difference will be the amount for Owners Equity $ 5.3million.
ROA = 11.7% , the formula is Net Income/Assets.
Answers
Answer:
Direct material= $340
Explanation:
Giving the following information:
Direct labor $540
Beginning work in process inventory $330
Ending work in process inventory $420
Cost of goods manufactured $1620
Manufacturing overhead $830
To calculate the direct material used in production, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
1,620= 330 + DM + 540 + 830 - 420
Direct material= $340
B. The second advisor because the total first-year cost is $5,000.
C. The first advisor because the total first-year cost is $5,000.
D. Because the cost is approximately the same, either advisor could be selected.
Answers
Answer:
The answer is A.
Explanation:
According to the details given in the question on the two financial advisor's approach, the first advisor does not request a payment but a commission on the funds purchased with the inheritance money. The second advisor does request payment for the job and also a share on the assets managed with the inheritance money.
If Kirby wants to minimize the upfront expenses which can be described as the sum that is paid before a service or a job is done, then the first advisor is the better option. So the answer is A.
I hope this answer helps.
Answers
Answer:
2021 = 9.2 times
2022 = 10.4 times
Explanation:
Accounts receivable turnover measure the average times the company received their receivable, It measure the efficiency of the company regarding collection from customers. Turnover will be higher if company has low ratio of receivables to sales value.
2022 2021
Average accounts receivable $539,000 $577,000
Net sales on account $5,605,600 $5,308,400
Accounts receivable turnover = Net Sales / Average Receivable
2021
Accounts receivable turnover = $5,308,400 / $577,000
Accounts receivable turnover = 9.2 times
2021
Accounts receivable turnover = $5,605,600 / $539,000
Accounts receivable turnover = 10.4 times
Answer:
2022 accounts receivable turnover = 10.4 times
2021 accounts receivable turnover = 9.2 times
Explanation:
Accounts receivable turnover can be described as the number times it takes a company to collect its average accounts receivable within a specified accounting period, usually a year. It is used as a measure of efficiency of a company in collecting account receivables in a timely manner.
Accounts receivable turnover is therefore a ratio of net sales on account to the Average accounts receivable within a specified year. This can be stated as follows:
Accounts receivable turnover = Net sales on account/Average accounts receivable ………. (1)
Using equation (1), accounts receivable turnover for 2022 and 2021 can be calculated as follows:
2022 accounts receivable turnover = $5,605,600/$539,000 = 10.4 times
2021 accounts receivable turnover = $5,308,400/$577,000 = 9.2 times
The results imply that Marigold Company is more efficient in collecting account receivable in 2021 than 2022, because it takes fewer number of times in 2021, 9.2 times, than in 2022, 10.4 times.
Answers
Answer: Option B
Explanation: As we know that,
where,
Operating income = $60,000
total asset = current asset base - decrease in current asset base
total asset = $500,000 - $120,000
= $ 380,000
Now, putting the values into equation we get :-
= 15.79%
Answers
Answer:
a) If the homeowner has the $6000 available for the project, what would the cost of electricity from the power company need to be greater than ($/kW-hr) to make the project viable if other investments are providing 8% interest. ($0.0545/kW-hr)
we can use the present value of an annuity formula:
PV = monthly savings x annuity factor
- PV = $6,000
- Annuity factor, 300 periods, 0.6667% = 129.52005
monthly savings = $6,000 / 129.52005 = $46.3249
price of kW-hr = $46.3249 / 850 = $0.054499851 ≈ $0.0545
b) If the homeowner had to borrow the $6000 from the bank at 5% interest for 10 years (monthly payments) what would the cost of electricity need to be greater than in $/kWhr from the power company to make the project viable if other investments are providing 8% interest. ($0.0476/kW-hr)
the monthly payment to cover the loan = PV / annuity factor
- PV = $6,000
- Annuity factor, 120 periods, 0.4167% = 94.28033
monthly payment = $6,000 / 94.28033 = $63.64
price of kW-hr = $63.64 / 850 = $0.074870588 ≈ $0.0749