Based on the following analysis of last year’s operations ofMoline Inc., a financial vice...

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Accounting

Based on the following analysis of last year’s operations ofMoline Inc., a financial vice president of the company believesthat the firm’s total net income could be increased by $500,000 ifits design division were discontinued. (Amounts are given inthousands of dollars.) Totals All Other Divisions Design DivisionSales $23,500 $18,000 $5,500 Product costs: Variable (9,500)(7,000) (2,500) Fixed (6,000) (5,000) (1,000) Gross profit $8,000$6,000 $2,000 Operating expenses: Variable (4,200) (2,500) (1,700)Fixed (2,300) (1,500) (800) Net income (loss) $1,500 $2,000 $500Required: a. Assuming that total fixed costs and expenses would notbe affected by discontinuing the design division, compute theincrease (decrease) in net income. b. Assume that discontinuance ofthe design division will enable the company to avoid 70% of thefixed portion of product costs and 80% of the fixed operatingexpenses allocated to the design division. Calculate the increase(decrease) in net income.

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a particulars current activity proposed activity difference in amount sales 23500 18000 5500 product costs variable costs 9500 7000 2500 fixed costs 6000 6000 0 gross profit 8000 5000 3000 operating See Answer

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In: AccountingBased on the following analysis of last year’s operations ofMoline Inc., a financial vice president...Based on the following analysis of last year’s operations ofMoline Inc., a financial vice president of the company believesthat the firm’s total net income could be increased by $500,000 ifits design division were discontinued. (Amounts are given inthousands of dollars.) Totals All Other Divisions Design DivisionSales $23,500 $18,000 $5,500 Product costs: Variable (9,500)(7,000) (2,500) Fixed (6,000) (5,000) (1,000) Gross profit $8,000$6,000 $2,000 Operating expenses: Variable (4,200) (2,500) (1,700)Fixed (2,300) (1,500) (800) Net income (loss) $1,500 $2,000 $500Required: a. Assuming that total fixed costs and expenses would notbe affected by discontinuing the design division, compute theincrease (decrease) in net income. b. Assume that discontinuance ofthe design division will enable the company to avoid 70% of thefixed portion of product costs and 80% of the fixed operatingexpenses allocated to the design division. Calculate the increase(decrease) in net income.