Barbour Corporation, located in Buffalo, New York, is a retailer of hightech products and is known...
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Barbour Corporation, located in Buffalo, New York, is a retailer of hightech 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 statement, he agreed that T-2 should be dropped. If this is done, sales of T-1 are expected to increase by 10% next year, the firm's cost structure will remain the same. Sales Variable cost of goods sold Contribution margin Expenses: Fixed corporate costs Variable selling and administration Fixed selling and administration Total expenses Operating income Net loss on discontinuing T-2 $ T-1 $ 220,000 74,000 $ 146,000 Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. Required % increase in sales of T-1 64,000 25,000 16,000 $ 105,000 $ 41.000 Required % increase in sales from T-1 T-2 $ 276.000 138,000 $ 138,000 71,900 79,000 54.000 25,000 $ 158,000 $ (20.000) | 2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-2? (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 $45,500? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) % Barbour Corporation, located in Buffalo, New York, is a retailer of hightech 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 statement, he agreed that T-2 should be dropped. If this is done, sales of T-1 are expected to increase by 10% next year, the firm's cost structure will remain the same. Sales Variable cost of goods sold Contribution margin Expenses: Fixed corporate costs Variable selling and administration Fixed selling and administration Total expenses Operating income Net loss on discontinuing T-2 $ T-1 $ 220,000 74,000 $ 146,000 Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. Required % increase in sales of T-1 64,000 25,000 16,000 $ 105,000 $ 41.000 Required % increase in sales from T-1 T-2 $ 276.000 138,000 $ 138,000 71,900 79,000 54.000 25,000 $ 158,000 $ (20.000) | 2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-2? (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 $45,500? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) %
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NASTOFNAN 20 22 A B Current contribution margin income statement T1 Sales Variable costs Variable co... View the full answer
Related Book For
Cost Management A Strategic Emphasis
ISBN: 978-1259917028
8th edition
Authors: Edward Blocher, David F. Stout, Paul Juras, Steven Smith
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