ACTG2020_Week5 2014 Ch12CMD (1)

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Unformatted text preview: t this second approach. LO 2 Comparative Income Approach Solution Keep Drop Digital Digital W atches W atches Difference Sales $ 500,000 $ $ (500,000) Less variable expenses: Manufacturing expenses 120,000 120,000 Shipping 5,000 5,000 Commissions 75,000 75,000 Total variable expenses 200,000 200,000 Contribution margin 300,000 (300,000) Less fixed expenses: General factory overhead 60,000 Salary of line manager 90,000 IIf the digital watch f the digital watch Depreciation 50,000 lline is dropped, the ine is dropped, the Advertising – direct 100,000 company gives up Rent – factory space 70,000 company gives up General admin. expenses 30,000 iits contribution ts contribution Total fixed expenses 400,000 margin. margin. Net operating loss $ (100,000) LO 2 Comparative Income Approach Solution Keep Drop Digital Digital W atches W atches Sales $ 500,000 $ Less variable expenses: Manufacturing expenses 120,000 Shipping 5,000 Commissions 75,000 Total variable expenses 200,000 Contribution margin 300,000 Less fixed expenses: General factory overhead 60,000 60,000 Salary of line manager 90,000 Depreciation 50,000 50,000 Advertising – direct 100,000 Rent – factory space 70,000 General admin. expenses 30,000 30,000 Total fixed expenses 400,000 140,000 Net operating l...
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