Months of January through June, of the current year. The activity base that Mercy uses to measure Month Total Costs:
January Patient days $342,000
February 2,500 332,000
March 2,800 288,000
April 1,600 385,000
May 3,200 396,000
June 3,600 305,000
Required:
a. Compute the total cost that Mercy Hospital should incur for 3,350 patient days.
The Scrooge and Marley Manufacturing Co. have two product lines: power tools and hand tools. The following income statement highlights the results of operations for the previous year.
Power Tools:
Sales: $1,377,500
Cost of Goods Sold:
Variable: $246,500
Fixed: $203,000
Total Cost of Goods Sold: $449,500
Gross Margin: $928,000
Selling and Administrative Costs:
Variable: $594,500
Fixed: $217,500
Total Selling and Administrative Costs: $812,000
Operating Income (Loss): $116,900
Hand Tools:
Sales: $449,500
Cost of Goods Sold:
Variable: $139,200
Fixed: $130,500
Total Cost of Goods Sold: $220,960
Gross Margin: $658,300
Selling and Administrative Costs:
Variable: $389,760
Fixed: $119,600
Total Selling and Administrative Costs: $509,360
Operating Income (Loss): $148,940
The owner of the company is considering deleting the hand tools product line. The accountants for the year estimate that dropping the hand tools product line will save $62,800 in Fixed Cost of Goods Sold. Sales of the remaining product line are expected to increase by $10,400.
Required: Determine the income after deleting the hand tool product line.
