2 gross profit 186000 3 compare the resulting net

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(2) Gross profit $186,000
3. Compare the resulting net incomes and comment on management's decision. 2. Using incremental analysis, determine if the table cleaner should be processed further. (CMA adapted) Compute gain or loss, and determine if equipment should be replaced . -
Price per bootle - Floor cleaner $ 20.00 Total revenue -Floor cleaner $ 400,000.00 No of bottles - Table Stain remover 12,000.00 Price per bootle - Table Stain remover $ 14.00 Total revenue - Table Stain remover $ 168,000.00 No of bottles - Table polish 12,000.00 Price per bootle - Table polish $ 14.00 Total revenue - Table polish $ 168,000.00 TOTAL REVENUE $ 736,000.00 Less Cost of production $ 450,000.00 Additional Processing cost $ 100,000.00 Additonal cost for further processing $ - Gross Profit $ 186,000.00 Incremental earnngs as a result of further processing Profit when table cleaner is processed further $ 186,000.00 Profit when table cleaner is not processed further $ 154,000.00 $ 32,000.00 Decision Processing results into a $32,000 increase in net income, hence the decision by management not to process further is not a wise decision. Incremental Analysis Particulars Table cleaner is not processed further Table cleaner is processed further Net Income Increase/Decreas e Incremental Revenue $ 204,000.00 $ 336,000.00 $ 132,000.00 Incremental cost $ - $ (100,000.00) $ (100,000.00)
Net Income $ 204,000.00 $ 236,000.00 $ 32,000.00 Using Incremental analysis, the table cleaner should be processed further

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