13. Veblen Company manufactures a variety of athletic shoes: basketball, running, and tennis. Sales of the...
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13. Veblen Company manufactures a variety of athletic shoes: basketball, running, and tennis. Sales of the tennis shoes have fallen off. Veblen is considering several options: 1) drop the tennis shoe line; 2) replace the tennis shoe line with golf shoes; 3) retool the tennis shoe line to make "Airtennies." Price and cost data are as follows: Basketball $90 Running $65 $40 $210,000 Tennis $40 Golf Airtennies $70 Price Variable cost/unit Fixed costs Number of units $60 $45 $35 $43 $50 $200,000 $50,000 $50,000 25,000 $90,000 10,000 15,000 2,500 6.000 If the tennis shoe line is dropped, the $50,000 fixed cost is totally avoidable. A. Calculate the impact on operating income, using relevant amounts only, for keeping the tennis shoe line. Calculate the impact on operating income, using relevant amounts only, for option 1. Calculate the impact on operating income, using relevant amounts only, for option 2. Calculate the impact on operating income, using relevant amounts only, for option 3. Which option is best? B. C. D. E. 13. Veblen Company manufactures a variety of athletic shoes: basketball, running, and tennis. Sales of the tennis shoes have fallen off. Veblen is considering several options: 1) drop the tennis shoe line; 2) replace the tennis shoe line with golf shoes; 3) retool the tennis shoe line to make "Airtennies." Price and cost data are as follows: Basketball $90 Running $65 $40 $210,000 Tennis $40 Golf Airtennies $70 Price Variable cost/unit Fixed costs Number of units $60 $45 $35 $43 $50 $200,000 $50,000 $50,000 25,000 $90,000 10,000 15,000 2,500 6.000 If the tennis shoe line is dropped, the $50,000 fixed cost is totally avoidable. A. Calculate the impact on operating income, using relevant amounts only, for keeping the tennis shoe line. Calculate the impact on operating income, using relevant amounts only, for option 1. Calculate the impact on operating income, using relevant amounts only, for option 2. Calculate the impact on operating income, using relevant amounts only, for option 3. Which option is best? B. C. D. E.
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Basketball Running Tennis Golf Airtennies Price 90 65 40 60 70 Less variable cost 45 40 35 43 50 Contribution per unit 45 25 5 17 20 x No of units pro... View the full answer
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