Question
In: Accounting
Bonita Division has the following data: Sales $495000 Variable expenses 235000 Fixed expenses 285000 The fixed...
Bonita Division has the following data:
Sales $495000
Variable expenses
235000
Fixed expenses 285000
The fixed costs are not avoidable and must be allocated to
profitable divisions if the segment is eliminated. What will be the
incremental effect on net income if Bonita Division is
eliminated?
Solutions
Expert Solution
| Bonita Division | |||
| Particulars | Value | % | |
| Sales | $ 4,95,000 | ||
| Less: Variable cost | $ 2,35,000 | ||
| Contribution | $ 2,60,000 | 53% | |
| Less: Fixed cost | $ 2,85,000 | ||
| Margin or Net Profit | $ (25,000) | -5% | |
| If fixed cost is not avoidable and it must be allocated to divisions, Net profit is negative comes by 5%. If Fixed cost is avoidable and not allocated to division, it's contribution comes by 53%. In this way it's contribution is good for business continuing. |
ekkarill92 answered 3 years agoRelated Solutions
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Variable expenses $6,300,000
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Food sales $ 950,000 Other revenue 5% of total revenue Expenses: Fixed Variable* Labor $
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$ 950,000
Other revenue
5% of total revenue
Expenses:
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Variable*
Labor
$ 100,000
10%
Cost of sales
$ -
35%
Supplies
$ -
5%
Energy
$ 12,000
3%
Marketing
$ 5,000
4%
Maintenance
$ 12,000
2%
Property taxes
$ 4,000
Depreciation
$ 15,000
Property insurance
$ 5,000
Rent
$ 3,500
* As a percentage of food sales.
The Robinson Diner, managed by Ina Fay, needs your assistance
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Sales (4,000 units)
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Variable
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Contribution margin
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Fixed
expenses
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Net
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Fixed marketing expenses
300,000
Fixed admin expenses
450,000
1,330,000
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expenses
230,000
Income before
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Net
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Your company is considering out-sourcing the sales and marketing
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Variable
$3,250,000
Fixed
overhead
640,000
3,890,000
Gross
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Selling and administrative expenses
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Fixed marketing expenses
300,000
Fixed admin expenses
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1,330,000
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Fixed Interest
expenses
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640,500
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