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how do you know how much to allocate to platinum and how much to gold from silvers fixed cost. I dont understand how to get
how do you know how much to allocate to platinum and how much to gold from silvers fixed cost. I dont understand how to get 27,778 and 22,222
Problem 3 Olympic Manufacturing produces three different products: Platinum, Gold, and Silver. The financial statement from last quarter is shown below. Platinum Gold Silver Total Sales $ 500,000 $ 400,000 $ 200,000 $1,100,000 Variable costs (350,000) (300,000) (160 000) (810.000) Contribution margin 150,000 100,000 40,000 290,000 Fixed costs (80,000) (60.000) (50.000) (190,000) Operating profit (loss) $70,000 $ 40.000 $(10.000) $ 100.000 The general manager is thinking of eliminating the Silver product line to improve the financial results. The cost accountant cautions that the fixed costs allocated to Silver have to be absorbed by the remaining two products if the decision is finalized. What should the general manager of Olympic Manufacturing do and why? Problem 3 Handout keep or Drop Platinum Gold Total Sales 500.000 400,000 900,000 UG (350,000 (300,005) 26so,coo) cu S0030 100,000 250, CON FC (80,00) (60,000) (140,000 Allocaled Silver FC (21,770) (22,222) (S00002 Operating I 42.202 17. 778 20.000 keep silver because profit dropped by $40,000 when excluding it, Silver FC = 50,000 Step by Step Solution
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