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6.3   Questions 1) If a department in a department store under

Question : 6.3   Questions 1) If a department in a department store under : 1419228

 

6.3   Questions

 

1) If a department in a department store is under consideration to be eliminated, unavoidable fixed expenses are ________ to the decision.

A) incremental

B) marginal

C) relevant

D) irrelevant

2) Department A covers one section of a large factory building. Which of the following costs is relevant to the decision to eliminate Department A?

A) Heating expenses of building allocated to Department A

B) General corporate overhead allocated to Department A

C) Depreciation Expense on store building allocated to Department A

D) Salary Expense of Supervisor in Department A; he only works in Department A

 

3) If a department in a grocery store is under consideration to be eliminated, which of the following cost(s) is(are) NOT relevant to the decision?

A) avoidable fixed expenses

B) unavoidable costs

C) common costs

D) B and C

 

4) If a department in a department store is eliminated, ________ costs will not continue.

A) unavoidable

B) common

C) corporate

D) avoidable

5) Central Industries has three product lines: A, B and C. The following information is available:

 

Product A                     Product B       Product C

Sales$100,000$90,000$44,000

Variable costs76,00048,00035,000

Contribution margin24,00042,0009,000

Avoidable fixed costs9,00018,0003,000

Unavoidable fixed costs6,0009,0007,700

Operating income(loss) $9,000$15,000$(1,700)

 

Central Industries is thinking about dropping Product C because it is reporting a loss. Assume Central Industries drops Product C and does not replace it. What will happen to operating income?

A) increase by $600

B) increase by $2,400

C) decrease by $6,000

D) decrease by $9,000

 

6) Sahara Industries has three product lines: A, B and C. The following annual information is available:

Product A                    Product B       Product C

Sales$100,000$90,000$88,000

Variable costs76,00048,00079,000

Contribution margin24,00042,0009,000

Avoidable fixed costs9,00018,0003,000

Unavoidable fixed costs6,0009,0009,400

Operating income(loss) $9,000$15,000$(3,400)

 

Sahara Industries is thinking about dropping Product C because it is reporting a loss. Assume Sahara Industries drops Product C and the space formerly used to produce Product C is rented out for $15,000 per year. What will happen to operating income?

A) increase by $6,600

B) increase by $9,000

C) increase by $14,400

D) increase by $15,000

7) Cesar Company has three product lines: A, B and C. The following annual information is available:

Product A                     Product B       Product C

Sales$100,000$90,000$44,000

Variable costs76,00048,00035,000

Contribution margin24,00042,0009,000

Avoidable fixed costs9,00018,0003,000

Unavoidable fixed costs6,0009,0007,700

Operating income(loss) $9,000$15,000$(1,700)

 

Assume Cesar Company drops Product C. Cesar Company then doubles the production and sales of Product B without increasing fixed costs. What will happen to operating income?

A) increase by $15,000

B) increase by $24,000

C) increase by $36,000

D) increase by $42,000

 

8) Bally Company has three product lines: A, B and C. The following annual information is available:

Product A                    Product B       Product C

Sales$60,000$90,000$24,000

Variable costs36,00048,00020,000

Contribution margin24,00042,0004,000

Avoidable fixed costs9,00018,0003,000

Unavoidable fixed costs6,0009,0002,400

Operating income(loss) $9,000$15,000$(1,400)

 

Assume Bally Company drops Product C. What will happen to operating income?

A) increase by $1,400

B) increase by $3,800

C) decrease by $1,000

D) decrease $1,400

9) The most recent income statement for the Venetian Branch of Palm Harbor Bank is presented below:

 

Sales$57,000

Variable costs31,500

Contribution margin25,500

Avoidable fixed costs13,500

Unavoidable fixed costs20,000

Operating loss$(8,000)

 

Palm Harbor Bank is thinking about eliminating the Venetian Branch. If the branch is eliminated, Palm Harbor Bank's operating income will ________.

A) increase by $8,000

B) increase by $25,500

C) decrease by $12,000

D) decrease by $31,500

 

10) The most recent income statement for the South Branch of First Financial Bank is presented below:

 

Sales$57,000

Variable costs31,500

Contribution margin25,500

Avoidable fixed costs13,500

Unavoidable fixed costs18,000

Operating loss$(6,000)

 

First Financial Bank is thinking about eliminating the South Branch. If the branch is eliminated, First Financial Bank's operating income will ________.

A) increase by $6,000

B) increase by $25,500

C) decrease by $12,000

D) decrease by $31,500

 

 

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