1Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has been experiencinglosses on the knapsacks for some time, as shown by the contribution format income statement below:WILLIAMS PRODUCTS INC.Income Statement-School KnapsacksFor the Quarter Ended June 30SalesVariable expenses:Variable manufacturing expensesSales commissionsShippingTotal variable expensesContribution marginFixed expenses:Salary of product-line managerGeneral factory overheadDepreciation of equipment (no resale value)Advertising-traceableInsurance on inventoriesPurchasing departmentTotal fixed expensesOperating loss"Allocated on the basis of machine-hours.*Allocated on the basis of sales dollars.$58,80023,1006,3007,50042,100*14,00048,7003,30026,440$210,00088,200121,800142,040$(20,240)Discontinuing the knapsacks would not affect sales of other product lines and would have no noticeable effect on the company's totalgeneral factory overhead or total purchasing department expenses. Required:a. Compute the increase or decrease of net operating income if the Williams Products Inc line is continued or discontinued. (Input allamounts as positive except Decreases in Sales, Decreases in Contribution Margin, and Net Losses which should be indicated by aminus sign.)SalesVariable expenses:Variable manufacturing expensesSales commissionsShippingTotal variable expensesContribution marginFixed expenses:Salary of product-line managerGeneral factory overheadDepreciation of equipmentAdvertising traceableInsurance on inventoriesPurchasing departmentTotal fixed expensesOperating lossKeep School Drop SchoolKnapsackKnapsackDifference:OperatingIncomeIncrease or(Decrease)K

Irrelevant costs, also known as sunk costs, are expenses that have already been incurred and cannot…

Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has beer losses on the knapsacks for some time, as shown by the contribution format income statement below:

Williams Products Inc. manufactures and sells a number of items, including school knapsacks. The company has beer losses on the knapsacks for some time, as shown by the contribution format income statement below:

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter21: Variable Costing For Management analysis

Section: Chapter Questions

Problem 4PB: Salespersons report and analysis Pachec Inc. employs seven salespersons to sell and distribute its...

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