Question : 151.Abel Company produces three versions of baseball bats: wood, aluminum, : 1311779

 

 

151.Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows:

Wood  AluminumHard Rubber   Total

Sales$500,000$200,000$65,000$765,000

Variable expenses  325,000  140,000  58,000  523,000

Contribution margin175,00060,0007,000242,000

Fixed expenses    75,000    35,000  22,000  132,000

Net income (loss)$100,000$  25,000$(15,000)$110,000

 

Assume all of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

a.$125,000

b.$103,000

c.$105,000

d.$140,000

 

 

152.What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?

a.All expenses of the eliminated segment will be eliminated.

b.Net income will decrease.

c.Net income will increase.

d.The company’s variable costs will increase.

 

 

153.A company has three product lines, one of which reflects the following results:

Sales$215,000

Variable expenses  125,000

Contribution margin90,000

Fixed expenses  130,000

Net loss$ (40,000)

If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company’s net income will

a.increase by $40,000.

b.decrease by $90,000.

c.decrease by $12,000.

d.increase by $12,000.

 

 

154.A company is considering eliminating a product line. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. If the product line is discontinued,

a.total net income will increase by the amount of the product line’s fixed costs.

b.total net income will decrease by the amount of the product line’s fixed costs.

c.the contribution margin of the product line will indicate the net income increase or decrease.

d.the company’s total fixed costs will decrease.

 

 

155.A segment has the following data:

Sales$700,000

Variable expenses300,000

Fixed expenses550,000

What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?

a.$400,000 increase

b.$400,000 decrease

c.$5,000 decrease

d.Cannot be determined from the data provided.

 

 

156.Corn Crunchers has three product lines. Its only unprofitable line is Corn Nuts, the results of which appear below for 2013:

Sales$1,400,000

Variable expenses  920,000

Fixed expenses  600,000

Net loss$ (120,000)

If this product line is eliminated, 30% of the fixed expenses can be eliminated. How much are the relevant costs in the decision to eliminate this product line?

a.$180,000

b.$1,520,000

c.$1,340,000

d.$1,100,000

 

 

157.North Division has the following information:

Sales$1,200,000

Variable expenses640,000

Fixed expenses620,000

If this division is eliminated, the fixed expenses will be allocated to the company’s other divisions. What is the incremental effect on net income if the division is dropped?

a.$60,000 increase

b.$620,000 decrease

c.$560,000 decrease

d.$580,000 increase

 

158.The potential effects of the decision to eliminate a line of business on existing employees and the community are

a.ignored in incremental analysis.

b.quantitative factors.

c.qualitative factors.

d.opportunity costs.

 

 

159.When will the elimination of a product line have no effect on the company’s overall profit?

a.When the avoidable fixed costs equal the product line’s contribution margin

b.When the unavoidable fixed costs equal the product line’s contribution margin

c.When there are no fixed costs incurred by the product line

d.When the product line contribution margin is negative

 

 

160.Accounting’s contribution to the decision-making process occurs in all of the following steps except to

a.identify the problem and assign responsibility.

b.determine possible courses of action.

c.review results of the decision.

d.make a decision.