Sales of athletic shoes have on overall profitability

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Reference no: EM134146

Question :

American Produce Company brought a truckload of cantaloupes weighing 4,000 pounds for $1,200. American manufacture separated the cantaloupes into two grades: economy and superior. The superior grade cantaloupes had a net weight of 3,200 pounds and the economy grade cantaloupes totaled 800 pounds. American creates sells the superior grade at $0.45 per pound and the economy grade at $0.25 per pound. How much of the $1,200 cost of the truckload may be allocated to the superior grade cantaloupes using the physical quantity technique?

A manufacturing corporation sells one product with a variable cost of $18 per unit. The company knows that the price hike will affect demand. Fixed costs are $275,000 and the subsequent chart represents the estimated demand at several price levels. If sales exceed 50,000 units the company may need to lease additional manufacturing space and equipment at an additional cost of $100,000 per year.

Units Sold Price

25,000 $30

50,000 $28

75,000 $26

100,000 $23

Based on this information which of the subsequent statements is true?

Answer

A. Selling the units at $28 will produce a profit of $225,000.

B. Selling the units at $23 will produce a profit of $225,000.

C. Selling the units at $26 will produce a profit of $225,000.

D. Both A and D are correct thus the company would record the same profit under either pricing option.

Rally Shoe Company is trying to select whether or not to continue making bowling shoes. The subsequent information is available for the segments.

Bowling Shoes Athletic Shoes Boots

Sales $120,000 $420,000 $360,000

Variable Costs 64,000 220,000 140,000

Contribution Margin 56,000 200,000 220,000

Direct Fixed Costs 45,000 70,000 90,000

Allocated Common Fixed costs 20,000 70,000 60,000

Net Income ($9,000) $60,000 $70,000

Suppose that if bowling shoes were dropped, sales of athletic shoes could drop by 10%. What impact would losing 10 percent of the sales of athletic shoes have on overall profitability?

Answer

A. Income would decrease by $31,000.

B. Income would decrease by 30,000.

C. Income would increase by $3,000.

D. Income would decrease by $81,000.

Reference no: EM134146

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Sales of athletic shoes have on overall profitability : Suppose that if bowling shoes were dropped, sales of athletic shoes could drop by 10%. What impact would losing 10 percent of the sales of athletic shoes have on overall profitability?

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