Question
Hernandez Company has three products H1, H2 and H3 with the following information: H1 H2 H3 Sales $ 30,000 $ 45,000 $ 12,000 Variable costs
- Hernandez Company has three products H1, H2 and H3 with the following information:
| H1 |
| H2 |
| H3 |
| ||||||||
| Sales | $ | 30,000 |
|
| $ | 45,000 |
|
| $ | 12,000 |
| ||
| Variable costs | $ | 18,000 |
|
| $ | 24,000 |
|
| $ | 7,500 |
| ||
| Contribution margin | $ | 12,000 |
|
| $ | 21,000 |
|
| $ | 4,500 |
| ||
| Fixed costs: |
|
|
|
|
|
|
|
|
|
|
| ||
| Avoidable | $ | 4,500 |
|
| $ | 9,000 |
|
| $ | 3,000 |
| ||
| Unavoidable | $ | 3,000 |
|
| $ | 4,500 |
|
| $ | 2,000 |
| ||
| Pre-tax operating income | $ | 4,500 |
|
| $ | 7,500 |
|
| $ | (500 | ) | ||
Hernandez Co. is considering dropping the H3 product. Calculate the amount of Operating Income change and indicate if the change is an increase or decrease if the H3 product is dropped.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Case And Problem Materials In Management Accounting
Authors: Tony Brabazon And Tony ODea
2nd Edition
1412024315, 978-1412024310
