Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC Ltd. is concerning about its poor performance and considering whether or not dropping the production and sells of product R, which incurs losses of

ABC Ltd. is concerning about its poor performance and considering whether or not dropping the production and sells of product R, which incurs losses of Birr 4000. 

Additional information:

♦The salaries expense represents salaries paid to employees working directly on a product

♦The advertising expense represents product-advertising specific to each product line.

♦The depreciation expense represents depreciation on fixtures used for display of various product lines and has no resale value.

♦The rent expense represents rent on the entire building and is allocated to product lines. 

 The monthly rent Birr 13,000 for total depreciation is fixed under long-term lease agreement.

♦ The insurance expense represents insurance carried on inventories whit in each product line.

Required: Should ABC Ltd. Drop the product line R? Show your calculations.

image

4. ABC Ltd. manufactures three products R, S and T. Sales, cost and operating income information for the preceding month for each separate product line and for the total are given in Birr as follows. Product Line R S I Total Sales 60,000 50,000 70,000 180,000 Variable costs 40,000 25,000 45,000 110,000 Contribution Margin 20,000 25,000 25,000 70,000 Less Fixed expenses: Salaries 10,000 8,000 7,000 25,000 Advertising 4,000 3,000 5,000 12,000 Depreciation Fixture 3,000 4,000 2,000 9,000 Rent 4,000 4,000 5,000 13,000 Insurance 3,000 2,000 1,000 6,000 Total fixed expenses 23,000 19,000 20,000 65,000 Operating income (4000) 4,000 5,000 5,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To determine whether ABC Ltd should drop the product line R we need to calculate the total cost of producing and selling the product line R and compar... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield

15th edition

978-1118159644, 9781118562185, 1118159640, 1118147294, 978-1118147290

More Books

Students also viewed these Accounting questions

Question

Describe who gets hurt in a recession, and how?

Answered: 1 week ago

Question

1. Can they separate relevant from irrelevant information?

Answered: 1 week ago

Question

T F The term split personality refers to schizophrenia. (p. 209)

Answered: 1 week ago

Question

6.15 Identify psychological risk factors in coronary heart disease.

Answered: 1 week ago