List the major functions of financial markets and institutions in a modern financial system.
December 28, 2011
Categories: General Questions
A study has been conducted to determine if a product line should be discontinued. The contribution margin in the product line is $300,000 per year. Fixed expenses allocated to the product line are $390,000 per year. It is estimated that $240,000 of these fixed expenses could be eliminated if the product line is discontinued. What happens to the company s overall net operating income? Does it increase or decrease, and by how much?
A company manufactures a product. The company can manufacture 1,200,000 units a year at a variable cost of $3,000,000 and a fixed cost of $1,800,000. Based on projections for next year, 960,000 units will be sold at the regular price of $20.00 each. A special order has been received for 240,000 units to be sold at a 70% discount off the regular price. Total fixed costs would be unaffected by this order. By what amount would the company s net operating income be increased as a result of the special order?