Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need answers with FORMULAs in Excel Management is reviewing the profitability of the Company's four products and the potential effects of several proposals for varying

Need answers with FORMULAs in Excel

Management is reviewing the profitability of the Company's four products and the potential effects of several proposals for varying the product mix. The following data is available for the analysis:
TOTALS PRODUCT 1 PRODUCT 2 PRODUCT 3 PRODUCT 4
Revenue $ 69,575 $ 11,275 $ 18,900 $ 13,600 $ 25,800
Cost of goods sold 44,274 4,750 7,056 13,968 18,500
Gross profit $ 25,301 $ 6,525 $ 11,844 $ (368) $ 7,300
Operating expenses 12,012 1,990 2,976 2,826 4,220
Income before taxes $ 13,289 $ 4,535 $ 8,868 $ (3,194) $ 3,080
Units sold 1,100 1,350 1,700 2,150
Sales price per unit $ 10.25 $ 14.00 $ 8.00 $ 12.00
Variable cost of goods sold per unit $ 3.00 $ 2.75 $ 5.75 $ 7.00
Variable operating expenses per unit $ 1.10 $ 1.30 $ 1.00 $ 1.10
Each of the following proposals is to be considered independently. Consider only the product changes stated in each proposal; the activity of other products remains stable. Ignore income taxes.
Calculate the effect on total income if Product 3 is discontinued.
Item Amount
Sales price
Variable costs
Unit contribution margin
Loss generated by sales
Calculate the effect on total income if Product 3 is discontinued and consequently a 200 unit decrease in the sales of Product 2 occurs.
Item Amount
Income generated by discontinuing P3
Product 2 UCM
200 unit decrease in Product 2 sales
Net decrease in total income
Calculate the effect on income if the price of Product 3 is increased by $1 with a 300 unit decrease in sales.
Item Amount
UCM for Product 3
Income generated by sales
Recovery of negative CM
Net effect on income
The production of Product 1 can be doubled by adding a second shift, but higher wages must be paid, increasing the variable cost of goods sold $1 per unit for these additional units. Calculate the effect on income if the additional units can be sold.
Item Amount
Part of the plant in which Product 1 is produced can be easily adapted for the production of Product 4, but changes in quantities may make changes in sales prices advisable. Calculate the effect on income if production of Product 1 is reduced by 500 units (to be sold at $2 more per unit) and production of Product 4 is increased by 500 units (to be sold at $0.50 more per unit).
Item Amount
New CM
Product 1
Product 4
Old CM
Product 1
Product 4
Net effect on income (New CM - Old CM)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Global Perspective

Authors: Robert Libby, Patricia Libby, Daniel G Short

5th Edition

0071107746, 978-0071107747

More Books

Students also viewed these Accounting questions

Question

25.0 m C B A 52.0 m 65.0 m

Answered: 1 week ago