A product line should be dropped when a. All of the answer choices are correct. b....
Homework Answers
While evaluating the proposal of keeping and dropping the product 3 things are evaluated, 1. Does the product has a positive contribution margin, if the product has a positive contribution margin and the loss is due to the fixed cost and to some extent the fixed cost can not be avoided then the product should be kept even at loss as a positive contribution margin has a potential that the higher productivity will lead the coverage of fixed cost and will have a profit in future'.
2. The second factor is the fixed costs, if the fixed costs are avoidable after dropping the product and the avoided fixed cost is much more than the contribution margin then the product should be dropped however when unavoidable fixed cost are there then dropping the product will bring more loss keeping other things as constant.
3. The third factor is the additional growth to other departments, division or other products line which will bring the overall profit in positive or higher profits than the existing product is continued , i.e the changes in income if the product is dropped, if the change is positive then the product should be dropped and if negative then it should be kept as it is.
In the given case of the option B and C the product should not be dropped as it will not be beneficial for the company as a whole.
Thus the correct option is ---------------D i.e there will be a positive change in income if the product line is dropped.
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product line should be dropped when
a. All of the answer choices are correct.
b....
Please answer all the question!!! 5. When will the elimination overall profit? a. When the b. When th of a product line have no effect on the company's avoidable fixed costs equal the product...
Please answer all the question!!!
5. When will the elimination overall profit? a. When the b. When th of a product line have no effect on the company's avoidable fixed costs equal the product line's contribution margin e unavoidable fixed costs equal the product line's contribution margin d when there are no fixed costs incurred by the product line d. When the product line contribution margi n is negative 6. All of the following are relevant to the sell or...
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please answer all 4 multiple choice questions In a cost-volume-profit graph, the total cost line meets...
please
answer all 4 multiple choice questions
In a cost-volume-profit graph, the total cost line meets the Y (vertical) axis at the: a. variable cost per unit point. b. total sales revenues point. c. total fixed costs point. d. total mixed costs point. Which of the following equations is used to calculate the degree of operating leverage? a. Degree of Operating Leverage = Operating Income / Total Contribution Margin b. Degree of Operating Leverage = Total Fixed Cost / Operating...
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its cosmetics line. The company has three distinctly different
options: a skin cream, a bath oil, or a hair coloring gel. Relevant
information and budgeted annual income statements for each of the
products follow.
Determine the margin of safety as a percentage for each
product.
Prepare revised income statements for each product, assuming a
20 percent increase in the budgeted sales volume.
For each product, determine the percentage change...
Please answer all the question!!!
5. When will the elimination overall profit? a. When the b. When th of a product line have no effect on the company's avoidable fixed costs equal the product line's contribution margin e unavoidable fixed costs equal the product line's contribution margin d when there are no fixed costs incurred by the product line d. When the product line contribution margi n is negative 6. All of the following are relevant to the sell or...
The managers of Riverside Designs are considering dropping one of their product lines. The product line typically has the following revenue and costs: Sales $125,000 Variable costs 85,000 Contribution margin 40,000 Fixed costs 45.000 Operating loss $ (5,000) If the product line is discontinued, $4,000 of the fixed costs would be avoided. Also, the freed-up capacity would generate $6,000 of additional contribution margin from the expansion of other product lines. If Riverside discontinues the product line, the effect on overall...
please
answer all 4 multiple choice questions
In a cost-volume-profit graph, the total cost line meets the Y (vertical) axis at the: a. variable cost per unit point. b. total sales revenues point. c. total fixed costs point. d. total mixed costs point. Which of the following equations is used to calculate the degree of operating leverage? a. Degree of Operating Leverage = Operating Income / Total Contribution Margin b. Degree of Operating Leverage = Total Fixed Cost / Operating...
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Finch Company is considering the addition of a new product to
its cosmetics line. The company has three distinctly different
options: a skin cream, a bath oil, or a hair coloring gel. Relevant
information and budgeted annual income statements for each of the
products follow.
Determine the margin of safety as a percentage for each
product.
Prepare revised income statements for each product, assuming a
20 percent increase in the budgeted sales volume.
For each product, determine the percentage change...
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