Impact of fixed cost allocation on income


Response to the following problem:

Langer Company has three products (A, B, and C) that use common facilities. The relevant data concerning these three products follow.

                                  A                B               C             Total

Sales:                     $ 10000        $30000        $40000       $80000

Variable cost:           $ 5000          $20000        $25000       $50000

Contribution margin:  $5000          $10000        $15000        $30000

Fixed cost                 $5000           $15000       $30000        $50000

Operating cost:           $0               $(5000)      $(15000)     $(20000)

Required:

If fixed cost allocated to product line C are not avoidable and if product line C dropped, what will be the impact on income?

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Managerial Accounting: Impact of fixed cost allocation on income
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