Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. f T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. T-1 $ 230,000 T-2 Sales $ 284,000 Variable costs: Cost of goods sold Selling & adninistrative Contribution nargin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses 76,000 27,500 $ 126,500 142,000 56,000 $ 86,000 66,e00 18,000 $ 84,000 $ 42,500 81,000 27,000 $ 188,000 $ (22,000) Operating incone Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. 2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-27 (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 3. What is the required percentage increase in sales from T-1 to compensate for lost margin from T-2, if total fixed costs can be reduced by $48,500? (Enter your answer as a percentage rounded to 2 decimal places (l.e. 0.1234 should be entered as 12.34).) 1. 2. Required % increase in sales from T-1 3. Required % increase in sales from T-1 Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. f T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. T-1 $ 230,000 T-2 Sales $ 284,000 Variable costs: Cost of goods sold Selling & adninistrative Contribution nargin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses 76,000 27,500 $ 126,500 142,000 56,000 $ 86,000 66,e00 18,000 $ 84,000 $ 42,500 81,000 27,000 $ 188,000 $ (22,000) Operating incone Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. 2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-27 (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 3. What is the required percentage increase in sales from T-1 to compensate for lost margin from T-2, if total fixed costs can be reduced by $48,500? (Enter your answer as a percentage rounded to 2 decimal places (l.e. 0.1234 should be entered as 12.34).) 1. 2. Required % increase in sales from T-1 3. Required % increase in sales from T-1
Expert Answer:
Answer rating: 100% (QA)
ANSWER 1 The expected change in annual operating income by dropping T2 and selling ... View the full answer
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
Posted Date:
Students also viewed these accounting questions
-
The Electronics Shack is a retailer of electronics such as cell phones, satellite radios, mp3 players, and high-end LCD and plasma TVs. The Electronics Shack is a large chain with stores in strip...
-
A La Mode Inc. (ALM) is a retailer of women and childrens clothing, with stores across Canada. ALM has been in operation for the past 35 years and is a public company with a year-end of January 31....
-
Albertson Furniture Company is a retailer of home furnishings. It currently has stores in three cities' San Francisco, Los Angeles, and Phoenix. Operating data for the three stores in 2012 were as...
-
A job order cost accounting system is fully integrated into the general ledger of a company. Identify the major general ledger accounts used in a job order cost system. Explain how manufacturing...
-
A retail company recently completed a physical count of ending merchandise inventory to use in preparing adjusting entries. In determining the cost of the counted inventory, company employees failed...
-
Construct a decision list to classify the data below. Select tests to be as small as possible (in terms of attributes), breaking ties among tests with the same number of attributes by selecting the...
-
Chester Constructions is an engineering consulting firm specialising in the installation of electronic communications systems. The company is considering the purchase of testing equipment that will...
-
Two triangular wave pulses are traveling toward each other on a stretched string as shown in Fig.1S.33. Each pulse is identical to the other and travels at 2.00 cm/s. The leading edges of the pulses...
-
Many employees worked from home, or still may be working from home, during-and-post-COVID-19 pandemic era. What effect is this likely to have on the future of telecommuting? What information...
-
The first quarter tax return needs to be filed for Prevosti Farms and Sugarhouse by April 15, 2021. For the taxes, assume the second February payroll amounts were duplicated for the March 5 and March...
-
(A) Classify each of the following supplies as either: GST Taxable Supplies, GST-Free Supplies or Input Taxed Supplies. Assume all suppliers are registered for GST where appropriate. (2 marks) (i)...
-
Implement the method size() for HashST.
-
Write a program that takes the names of several image files as command-line arguments and displays them in a slide show (one every two seconds), using a fade effect to black and a fade from black...
-
Compute \(x\).hashCode() \% 5 for the single-character strings E A S Y Q U E S T I O N In the style of the drawing in the text, draw the hash table created when the \(i\) th key in this sequence is...
-
Add to Graph a method subgraph() that takes a SET as its argument and returns the induced subgraph (the graph comprising the specified vertices together with all edges from the original graph that...
-
Show that a \(\log -\log\) plot of the function \(c n^{b}\) has slope \(b\) and \(x\)-intercept \(\log c\). What are the slope and \(x\)-intercept for \(4 n^{3}(\log n)^{2}\) ?
-
(a) A dice is thrown n times where n is a sufficiently large enough number to provide a uniformly distributed set of results. What would be the conditions for the arrangement of the result set that...
-
Two mutually exclusive investment alternatives are being considered. Alternative A requires an initial investment of $20,000 in a machine. Annual operating and maintenance costs are anticipated to be...
-
Recent news reports say that Expedia.com pays wholesale prices for hotel rooms and then adds an average of 26 percent markup over the price it pays, and then sells the rooms on its Web site. This...
-
Smith Co. is a firm specializing in financial advice for retired individuals. After some analysis, you have determined that an earnings multiplier of 7 is appropriate for this type of business....
-
This exercise pertains to the XYZ Company example in the body of the chapter and the associated discussion of real options. Required 1. Define the term real option. Provide an example of each of the...
-
Assume a gain margin of 20 dB and a plant with a nominal gain of 50/sec. Assume also that the minimum GM of the system is specified to 10 dB. To what maximum value of gain can the plant climb under...
-
Name three benefits of using software R/D conversion compared with hardware R/D converters.
-
Correcting for reversal error correction and deadband compensation are special cases of what general technique?
Study smarter with the SolutionInn App