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