Question
In: Accounting
The financial information for Jamison drug store by business line is as follows: total drugs cosmetics...
- The financial information for Jamison drug store by business line is as follows:
|
total |
drugs |
cosmetics |
housewares |
|
|
sales |
$250,000 |
$125,000 |
$75,000 |
$50,000 |
|
variable expenses |
$105,000 |
$50,000 |
$25,000 |
$30,000 |
|
contribution margin |
$145,000 |
$75,000 |
$50,000 |
$20,000 |
|
fixed expenses |
||||
|
salaries |
$50,000 |
$29,500 |
$12,500 |
$8,000 |
|
advertising |
$15,000 |
$1,000 |
$7,500 |
$6,500 |
|
utilities |
$2,000 |
$500 |
$500 |
$1,000 |
|
depreciation |
$5,000 |
$1,000 |
$2,000 |
$2,000 |
|
rent |
$20,000 |
$10,000 |
$6,000 |
$4,000 |
|
insurance |
$3,000 |
$2,000 |
$500 |
$500 |
|
general administrative |
$30,000 |
$15,000 |
$9,000 |
$6,000 |
|
total |
$125,000 |
$59,000 |
$38,000 |
$28,000 |
|
net income/ loss |
$20,000 |
$16,000 |
$12,000 |
-$8,000 |
It was determined that the associated salaries, advertising and insurance would all be eliminated if Jamison drops the housewares segment. The utilities, depreciation, rent and general and administrative fees are all allocations and will not change if Jamison is dropped.
Jamison is currently deciding whether the company would benefit overall if the housewares business line was dropped completely, since it is losing money consistently each month. Using what you know about avoidable and unavoidable costs, advise Jamison as their outside consultant as to which is the better business decision. (Support your work with numbers.)
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in
the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 10%
$
140,000
Debt @ 10%
$
280,000
Common stock, $10 par
280,000
Common stock, $10 par
140,000
Total
$
420,000
Total
$
420,000
Common shares
28,000
Common shares
14,000
a. Complete the following table given earnings
before interest and taxes of $18,000, $42,000, and $59,000. Assume
the tax rate...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in
the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 9%
$
70,000
Debt @ 9%
$
140,000
Common stock, $10 par
140,000
Common stock, $10 par
70,000
Total
$
210,000
Total
$
210,000
Common shares
14,000
Common shares
7,000
a. Complete the following table given earnings
before interest and taxes of $12,000, $18,900, and $52,000. Assume
the tax rate...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow Drug Stores and Hall Pharmaceuticals are competitors in
the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 8%
$
120,000
Debt @ 8%
$
240,000
Common stock, $10 par
240,000
Common stock, $10 par
120,000
Total
$
360,000
Total
$
360,000
Common shares
24,000
Common shares
12,000
Complete the following table given earnings before interest and
taxes of $16,000, $28,800, and $57,000. Assume the tax rate is...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here. Lenow Hall Debt @
9% $ 190,000 Debt @ 9% $ 380,000 Common stock, $10 par 380,000
Common stock, $10 par 190,000 Total $ 570,000 Total $ 570,000
Common shares 38,000 Common shares 19,000
a. Complete the following table given earnings before interest
and taxes of $23,000, $51,300, and $64,000. Assume the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 9%
$
130,000
Debt @ 9%
$
260,000
Common stock, $10 par
260,000
Common stock, $10 par
130,000
Total
$
390,000
Total
$
390,000
Common shares
26,000
Common shares
13,000
a. Complete the following table given earnings
before interest and taxes of $17,000, $35,100, and $58,000. Assume
the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 10%
$
100,000
Debt @ 10%
$
200,000
Common stock, $10 par
200,000
Common stock, $10 par
100,000
Total
$
300,000
Total
$
300,000
Common shares
20,000
Common shares
10,000
a. Complete the following table given earnings
before interest and taxes of $20,000, $30,000, and $120,000. Assume
the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 9%
$
160,000
Debt @ 9%
$
320,000
Common stock, $10 par
320,000
Common stock, $10 par
160,000
Total
$
480,000
Total
$
480,000
Common shares
32,000
Common shares
16,000
a. Complete the following table given earnings
before interest and taxes of $20,000, $43,200, and $61,000. Assume
the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 8%
$
300,000
Debt @ 8%
$
600,000
Common stock, $10 par
600,000
Common stock, $10 par
300,000
Total
$
900,000
Total
$
900,000
Common shares
60,000
Common shares
30,000
a. Complete the following table given earnings
before interest and taxes of $34,000, $72,000, and $89,000. Assume
the tax rate...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors in the discount drug chain store business. The...
Lenow’s Drug Stores and Hall’s Pharmaceuticals are competitors
in the discount drug chain store business. The separate capital
structures for Lenow and Hall are presented here.
Lenow
Hall
Debt @ 10%
$
110,000
Debt @ 10%
$
220,000
Common stock, $10 par
220,000
Common stock, $10 par
110,000
Total
$
330,000
Total
$
330,000
Common shares
22,000
Common shares
11,000
a. Complete the following table given earnings
before interest and taxes of $15,000, $33,000, and $56,000. Assume
the tax rate...
Selected financial information about Backpacking Resources, Inc., is as follows: Total assets $20,000,000 Total liabilities $8,000,000...
Selected financial information about Backpacking Resources,
Inc., is as follows:
Total assets
$20,000,000
Total liabilities
$8,000,000
Total preferred stock
$3,000,000
Total annual preferred stock
dividends
$210,000
Net profits after tax
$1,000,000
Number of shares of common stock
outstanding
400,000 shares
Current market price of common
stock
$57.00 a share
Annual common stock dividends
$2.28 a share
Using the company's financial information, compute the
following:
A) Dividend yield. Round the answer to two decimal places.
________%
B) Book value per share....
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