Accounting Questions Essay

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Darien Industries Darien Industries operates a cafeteria for its employees. The operation of the cafeteria requires fixed costs of $4,700 per month and variable costs of 40 percent of sales. Cafeteria sales are currently averaging $12,000 per month. Darien has an opportunity to replace the cafeteria with vending machines. Gross customer spending at the vending machines is estimated to be 40 percent greater than current sales because the machines are available at all hours. By replacing the cafeteria with vending machines, Darien would receive 16 percent of the gross customer spending and avoid all cafeteria costs. How much does monthly operating income change if Darien Industries replaces the cafeteria with vending machines? Current cafeteria income Sales $12,000 Variable Costs (40% x 12,000) (4,800) Fixed costs (4,700) Operating income $2,500 Vending machine income Sales (12,000 x 1.4) $16,800 Darien’s share of sales (.16 x $16,800) 2,688 Increase in operating income $188 Silky Smooth Lotions Silky Smooth lotions come in three sizes: 4, 8, and 12 ounces. The following table summarizes the selling prices and variable costs per case of each lotion size. Per Case 4 Ounce 8 Ounce 12 Ounce Price $36.00 $66.00 $72.00 Variable 13.00 24.50 27.00 Fixed costs are $771,000. Current production and sales are 2,000 cases of 4-ounce bottles; 4,000 cases of 8-ounce bottles; and 1,000 cases of 12-ounce bottles, Silky Smooth typically sells the three lotion sizes in fixed proportions as represented by the preceding sales amounts. Required: How many cases of 4-, 8-, and 12-ounce lotion bottles must be produced and sold for Silky Smooth to break even, assuming that the three sizes are sold in fixed proportions? J. P. Max Department Stores J. P. Max is a department store carrying a large and varied stock of
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