M Inbox - information@evolvix PD Madison Springs Conference X HST HST Calculator / Harmonize X D2L McGraw-Hill Connect - 22F X Question 2 - Module 10 - C X Course Hero X + X C https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252FIms.mheducation.com%252F... A Q Sign in . . . Module 10 - Chapter 9 Saved Help Save & Exit Submit Check my work 2 Tracey Douglas is the owner and managing director of Heritage Garden Furniture Lid., a South African company that makes museum- quality reproductions of antique outdoor furniture. Tracey would like advice concerning the advisability of eliminating the model C3 lawn chair. These lawn chairs have been among the company's best-selling products, but they seem unprofitable. 10 O points A condensed statement of operating income for the company and for the model C3 lawn chair for the quarter ended June 30 follows: Model C3 All + Lawn Chair Products Sales R1, 300, 000* R5, 900, 000 eBook Cost of sales: Direct materials 520, 000 1, 534, 000 Direct labour 312, 000 1, 357, 000 Fringe benefits (20% of direct labour) 62, 400 271, 400 Print Variable manufacturing overhead 15 , 600 59, 000 Building rent and maintenance 16,900 59, 000 Depreciation 83, 200 147, 500 Total cost of sales 1, 010, 100 3, 427,900 References Gross margin 289,900 2,472, 100 Selling and administrative expenses : Product managers' salaries 42,900 147, 500 Sales commissions (5% of sales) 65, 000 295, 060 Fringe benefits (20% of salaries and commissions) 21, 580 88, 560 Shipping 20, 000 236, 060 General administrative expenses 208, 000 944, 000 Total selling and administrative expenses 357 , 480 1, 711, 000 Net operating income (loss) R (67,580) R 761, 100 *The currency in South Africa is the rand, denoted here by R. The following additional data have been supplied by the company: a. Direct labour is a variable cost at Heritage Garden Furniture. b. All of the company's products are manufactured in the same facility and use the same equipment. Building rent, maintenance, and depreciation are allocated to products using various bases. The equipment does not wear out through use; it eventually becomes obsolete. c. There is ample capacity to fill all orders. d. Dropping the model C3 lawn chair would have no effect on sales of other product lines. e. Inventories of work in process or finished goods are insignificant f. Shipping costs are traced directly to products. g. General administrative expenses are allocated to products on the basis of sales dollars. There would be no effect on the total general administrative expenses if the model C3 lawn chair were dropped. h. If the model C3 lawn chair were dropped, the product manager would be laid off. ED Mc Hill O EN 5:03 PM Type here to search 0'C Cloudy 01 7 4X ENG 11/16/2022M Inbox - information@evolvix par Madison Springs Conference X HST HST Calculator / Harmonize X D2L McGraw-Hill Connect - 22F X Question 2 - Module 10 - C X Course Hero X + X C https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252FIms.mheducation.com%252F... A Q Sign in . . . Module 10 - Chapter 9 Saved Help Save & Exit Submit Check my work 2 d. Dropping the model C3 lawn chair would have no effect on sales of other product lines. e. Inventories of work in process or finished goods are insignificant. f. Shipping costs are traced directly to products. g. General administrative expenses are allocated to products on the basis of sales dollars. There would be no effect on the total 10 general administrative expenses if the model C3 lawn chair were dropped. O points h. If the model C3 lawn chair were dropped, the product manager would be laid off. + Required: a-1. At current level of sales, compute the effect of net operating income if the Model C3 lawn chair is dropped. Book in net operating income by R Print References 1-b. Would you recommend that the model C3 lawn chair be dropped? O Yes O No 2. What would sales of the model C3 lawn chair have to be, at minimum, in order to justify retaining the product? (Hint. Set this up as a break-even problem, but include only the relevant costs from part (1).) (Round "Contribution margin ratio" to 2 decimal places and final answer to the nearest whole number.) Sales volume R Mc Hill EN 5:03 PM Type here to search O 0'C Cloudy 01 4X ENG 11/16/2022