Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow. Regular Super Total Units 12,000 4,300 16,300 Sales revenue $

Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Regular Super Total
Units 12,000 4,300 16,300
Sales revenue $ 360,000 $ 989,000 $ 1,349,000
Less: Cost of goods sold 288,000 645,000 933,000
Gross Margin $ 72,000 $ 344,000 $ 416,000
Less: Selling expenses 72,000 203,000 275,000
Operating income (loss) $ 0 $ 141,000 $ 141,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $30 per unit for Super. Variable selling expenses are $3 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 20% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

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

Step: 2

blur-text-image

Step: 3

blur-text-image

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

Essentials Of Federal Taxation 2018

Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

9th Edition

9781260007640

Students also viewed these Accounting questions