Total sales of ABC Corp. is $100 M and net income is $11.5M. The manager belives...

Total sales of ABC Corp. is $100 M and net income is $11.5M. The manager belives that eliminating the group marginal customers which constitutes 10% of the total sales, will increase the performance of the company. Distribute the revenue and expenses of BC Corp. between the marginal customers and credible customers, based on income statement, indicate whether the company should eliminate marginal customers or not, in terms of net profit margin.

Percentage of sales total/ fixed/ variable

Cost of sales (%) 70/ - /70

Overhead cost (%) 15/ 8/ 7

Collection exp.(%) 1 /-/ 1

Other exp. (%) 2.5/2/ 0.5

Expert Solution

Based on the given data, pls find below workings:

The costs include the component and fixed as well as variable costs; At any point of time, when there are fixed costs in the firm, the same need to be effectively covered thru the varible margin, to have the overall net margin % positive or higher or better;

In this case, as well, if the marginal customers are not considered then the overall sales drop and associated variable margin portion drop resulting in reduction of fixed costs coverage capacity and thus drop in overall net income margin %; Hence, the maginal customers portion should not be eliminated.

jeff jeffy answered 1 year ago

5. Total sales of ABC Corp. are $ 100 M and net income is $ 11,5M....

5. Total sales of ABC Corp. are $ 100 M and net income is $ 11,5M. The manager thinks eliminating the group marginal customers that constitutes the 10% of the total sales, will increase. Distributing the incomes and expenses of the Company between the marginal customers and credible customers based on income statement, indicate whether the company should eliminate marginal customers or not. Percentage of sales total fixed variable Cost of sales (%) 70 - 70 Overhead cost (%) 15...

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which...

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which is interest-bearing debt at 8% interest. The ROE for XYZ is 15% and the tax rate is 25%. Find ABC’s ROA and ROIC.

Neiman Corp. has Net Income of $31,722 and Total Equity of $118,857. Also, its Sales are...

Neiman Corp. has Net Income of $31,722 and Total Equity of $118,857. Also, its Sales are $285,760, Total Assets are $245,626 and Total Liabilities are $126,769, but only $41,769 are from Current Liabilities. Porter’s Debt/Equity ratio is accordingly 1.067. Neiman's Total Asset Turnover ratio suggests that $1.163 dollars in sales is generated for each $1 of assets. Also, the Profit Margin shows that the firm has a Net Income of $0.111 for every $1 in sales. Industry average ratios: ROE...

1) A company had net income of $2,740,000, net sales of $26,500,000, and average total assets...

1) A company had net income of $2,740,000, net sales of $26,500,000, and average total assets of $11,800,000. Its return on total assets equals: Multiple Choice 23.22%. 44.53%. 10.34%. 4.31%. 430.66%. 2) Using the information below, calculate cost of goods sold for the period: Sales revenues for the period $ 1,316,000 Operating expenses for the period 251,000 Finished Goods Inventory, January 1 48,000 Finished Goods Inventory, December 31 53,000 Cost of goods manufactured for the period 552,000 Multiple Choice $798,000....

1. A company had net income of $48,000, net sales of $380,000, and average total assets...

1. A company had net income of $48,000, net sales of $380,000, and average total assets of $280,000. Its profit margin and total asset turnover were respectively: Multiple Choice 1.36%; 0.17. 1.97%; 1.36. 12.63%; 1.36. 1.36%; 12.63. 12.63%; 0.17. 2. Six months ago, a company purchased an investment in stock for $69,000. The investment is classified as available-for-sale securities. This is the company’s first and only investment in available-for-sale securities. The current fair value of the stock is $72,600. The...

At 2020 fye Poppers Corp. Net Income was $4.830 m and the company had an issue...

At 2020 fye Poppers Corp. Net Income was $4.830 m and the company had an issue of 24,000 options with a strike price of $50.00. There were 2.8 m shares of common stock outstanding. The company’s market cap was $127 m and its balance sheet showed $3.6m of $100 par, 4.3% convertible preferred stock. Poppers uses the treasury method for calculating diluted eps. The preferred stock may be converted at the ratio of four common shares per one share of...

ABC Corp 2014 Income Statement ($ in millions) &

ABC Corp 2014 Income Statement ($ in millions) Net sales $9,610 Less: Cost of goods sold 6,310 Less: Depreciation 1,370 Earnings before interest and taxes 1,930 Less: Interest paid 630 Taxable Income $1,300 Less: Taxes 455 Net income $ 845 Dividends paid to shareholders $ 275 ABC COrp 2013 and 2014 Balance Sheets ($ in millions) 2018 2019 2018 2019 Cash $ 310 $...

Analyze the following common size income statements for 3T Company: 2015 2014 Net sales 100% 100%...

Analyze the following common size income statements for 3T Company: 2015 2014 Net sales 100% 100% COGS 89 87 Gross margin 11% 13% Selling, general and administrative 7 9 Restructuring, asset impairments and other charges 0 9 Income/(loss) from operations 4% (5)% Interest expense (1) (2) Income/(loss) before taxes 3% (7%) Provision for/(benefit from) income taxes 1 0 Income/(loss) after taxes 2% (7)% Discontinued operations, net 6 1 Net income (loss)...

ABC Company Income Statement For the 12 month period ended 12/31/2016 Net Sales Cost of Sales...

ABC Company Income Statement For the 12 month period ended 12/31/2016 Net Sales Cost of Sales $ 450,000 Gross Profit $ 500,000 Operating Expenses: Depreciation $ 75,000 Amortization $ 25,000 Other Operating Expenses Total Operating Expenses $ 400,000 Income From Operations Interest Expense Net Income Before Taxes $ 80,000 Taxes- 30% Net Income EBITDA

Last year Meyer Corp had $415,000 of assets, $403,000 of sales, $28,500 of net income, and...

Last year Meyer Corp had $415,000 of assets, $403,000 of sales, $28,500 of net income, and a debt-to-total-capital ratio of 39%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets and total invested capital to $254,000. Sales, costs, and net income would not be affected, and the firm would maintain the same % capital structure but with less total debt. By how much would the reduction...

Question