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Kindly answer the two problems if it is possible. Thank you The following data were taken from the Helicon Company. Based on these data, the
Kindly answer the two problems if it is possible. Thank you
The following data were taken from the Helicon Company. Based on these data, the management of Helicon is considering eliminating product line B. they assumed that by operating only product line A and C, the company would have higher profits. Product A 100.000 Product B 200.000 Product C 300.000 Sales Cost of Sales: Materials Labor Variable overhead Fixed overhead TOTAL Gross Margin Selling and Administrative: Variable Fixed TOTAL Net income (loss) 25,000 20,000 10,000 5,000 60,000 40.000 80,000 50,000 15,000 35,000 180,000 20.000 75,000 40,000 20,000 15,000 150,000 150,000 12,000 8,000 20,000 20.000 10,000 30,000 40,000 (20,000) 30,000 40,000 70,000 80,000 It was determined that if product B is discontinued, 60% of the fixed overhead can be avoided and 50% of fixed selling and administrative expenses can also be avoided. Required: Based on the above data, should product line B be eliminated? Show your solution. The Sharon company is in the fish canning industry. Its regular monthly production from January to October averages 100 tins of tuna fish that will produce 1,000,000 fans of canned tuna that can be sold at 10 per can in the market. Its annual fixed costs amount to 18.000.000 that are evenly allocated on a 12- month period. During the months of November and December, the supply of tuna fish goes down to an average of 20 tons monthly or 200,000 cans of canned tuna monthly. Management is considering shutting down operations during the months of November and December on the belief that the company will be saved from greater losses during these months. If management decides to shut down operations, additional costs of 50,000 monthly will be incurred for security and insurance of the plant. The company will also spend additional 60,000 in restarting operations in January. The following data are gathered from the records of Sharon company: Raw materials 5.20 Direct labor 0.55 Variable overhead 0.25 Total variable cost per can 6.00 Variable selling and administrative expenses averages 0.10 per can. It is assumed that the market can absorb all canned tuna produced. Shutdown operations will reduce fixed costs during November and December by 40%. Required: a. Compute the shutdown cost. b. Determine the shutdown point. Evaluate the result of continued operations and compare with shutdown of operations. cStep by Step Solution
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