1.6 Keating Co. is considering disposing of equipment with a cost of $63,000 and accumulated depreciation...

1.6 Keating Co. is considering disposing of equipment with a cost of $63,000 and accumulated depreciation of $44,100. Keating Co. can sell the equipment through a broker for $30,000, less a 10% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $47,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is

Use this information for Falcon Co. to answer the question that follow.

10.1 Falcon Co. produces a single product. Its normal selling price is $30 per unit. The variable costs are $19 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units with a special price of $20 per unit. Falcon has the capacity to handle the special order, and for this order, a variable selling cost of $1 per unit would be eliminated.

If the order is accepted, what would be the impact on net income?

180. When a segment of a company is showing a net loss, it is always best to discontinue the segment in order not to continue with losses.

True

False

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Expert Solution

180. False, it is not always best to discontinue the segment if it is showing net loss. Sometimes it is better to keep the segment if it is having positive contribution. ie, atleast variable cost is getting covered. or evn continue the business if it is covering minimum to the extend of avoidable fixed cost.still it is a positive sign that the business loss is reduced to the minimum

ekkarill92 answered 11 months ago

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