Acct 346 Week 6 Quiz

ACCT 346 WEEK 6 QUIZ

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ACCT 346 Week 6 Quiz,

Incremental analysis [If Serving Pieces dropped]: Table 1

Snail Extraction Serving Total

Tools Pieces

Sales [$1,200,000 * 1.13] $1,356,000 $1,356,000

Less: Cost of goods sold [500,000/1,200,000 * 1,356,000] $565,000 $565,000

Contribution margin $791,000 $791,000

Less: Avoidable direct fixed costs:

Salaries $175,000 $175,000

Other $60,000 $60,000

Less: Unavoidable allocated fixed costs:

Rent $24,000 $24,000

Insurance $6,000 $6,000

Cleaning $7,000 $7,000

Executive salary $130,000 $130,000

Other $12,000 $12,000

Total costs $414,000 $414,000

Net Income $377,000 $377,000

Assumptions made:

Cost of goods sold are totally direct and variable. So, if serving pieces is droped, there would be no fixed cost of goods sold to be absorbed by Snail.

Incremental analysis : Table 2

Serving Serving Pieces Incremental

Pieces Dropped Effect

Retained

Sales $2,000,000 $1,356,000 $(644,000)

Less: Cost of goods sold 1,200,000 $565,000 $635,000

Contribution margin $800,000 $791,000 $(9,000)

Less: Avoidable direct fixed costs:

Salaries 350,000 $175,000 $175,000

Other 120,000 $60,000 $60,000

Less: Unavoidable allocated fixed costs:

Rent 24,000 $24,000

Insurance 6,000 $6,000

Cleaning 7,000 $7,000

Executive salary 130,000 $130,000

Other 12,000 $12,000

Total costs 649,000 $414,000 $235,000

Net Income $151,000 $377,000 $226,000

Question 4.4. (TCO 9) Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his lot. The building and equipment are estimated to cost $1,200,000, and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Munster’s required rate of return for this project is 12%. Net...