Unit 7 - Chapter 11 Self Quiz (ACCT211H)

School: Post University - Course: ACCT 211H - Subject: Accounting

Unit 7 - Chapter 11 Self Quiz(ACCT211H) 1.Product U23N has been considered a drag on profits at Jinkerson Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales$ 730,000 Variable expenses$ 350,000 Fixed manufacturing expenses$ 234,000 Fixed selling and administrative expenses$ 161,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product U23N is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: Loss in contribution margin-380000=350000-730000 Avoidable fixed costs237000 =144000+93000 Financial advantage (disadvantage)-143000 2.The management of Furrow Corporation is considering dropping product L07E. Data from the company's budget for the upcoming year appear below: Sales$ 830,000 Variable expenses$ 365,000 Fixed manufacturing expenses$ 291,000 Fixed selling and administrative expenses$ 166,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $186,000 of the fixed manufacturing expenses and $106,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: ($173,000)

3.A study has been conducted to determine if one of the departments in Carry Corporation should be discontinued. The contribution margin in the department is $80,000 per year. Fixed expenses charged to the department are $95,000 per year. It is estimated that $50,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, the yearly financial advantage (disadvantage) for the company would be: ($30,000) 4.Kahn Corporation (a multi-product company) produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. If Product X is discontinued, $50,000 of the $60,000 in annual fixed costs charged to Product X could be eliminated. The annual financial advantage (disadvantage) for the company of eliminating this product should be: $2,000 5.Banfield Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: VPYIWX Selling price per unit$ 248.04$ 230.66$ 505.44 Variable cost per unit$ 190.71$ 172.14$ 388.80 Centiliters of compound W3.903.808.10 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. Contribution margin per centiliter of compound W = (Selling price - Variable cost)/Centilitres of compound W VP = (248.04-190.71)/3.90 = 14.70 YI = (230.66-172.14)/3.80 = 15.40 WX = (505.44-388.80)/8.10 = 14.40 Therefore the ranking would be YI, VP, WX