a. Determine the effects on income of each product line and the
company in total if each of the alternative plans given is put into
effect. b. What is your recommendation to the management of Phoenix
Fashions? 52. (Product line) Festival Packing Company sells two
major lines of products, fish and chicken, to grocery chains and
food wholesalers. Income statements show-ing revenues and costs of
fiscal year 2000 for each product line follow: Fish Chicken Sales $
4,000,000 $ 1,800,000 Less: Cost of merchandise sold (2,400,000)
(1,300,000) Less: Commissions to salespeople (400,000) (150,000)
Less: Delivery costs (600,000) (120,000) Less: Depreciation on
equipment (200,000) (100,000) Less: Salaries of division managers
(80,000) (75,000) Less: Allocated corporate costs (100,000)
(100,000) Net income (loss) $ 220,000 $ (45,000) Management is
concerned about profitability of chicken sales and is considering
the possibility of dropping the line. Management estimates that the
equipment currently used to process chickens could be rented to a
competitor for $85,000 annually. If the chicken product line is
dropped, allocated corporate costs will decrease from a total of
$200,000 to $185,000; and all employees, including the manager of
the product line, would be dismissed. The depreciation would be
un-affected by the decision, but $105,000 of the delivery costs
charged to the chicken line could be eliminated if the chicken
product line is dropped. a. Recast the above income statements in a
format that provides more infor-mation in making this decision
regarding the chicken product line. b. What is the net advantage or
disadvantage (change in total company pre-tax profits) of
continuing sales of chicken? Part 3 Planning and Controlling 542 c.
Should the company be concerned about losing sales of fish products
if it drops the chicken line? Explain. d. How would layoffs that
would occur as a consequence of dropping the chicken line
potentially adversely affect the whole company? 53. (Product line)
You have been engaged to assist the management of Quality Chair
Company in resolving certain decisions. Quality has its home office
in Tennessee and leases facilities in Tennessee, Georgia, and
Florida, which pro-duce a high-quality bean bag chair designed for
residential use. The manage-ment of Quality has provided you with a
projection of operations for fiscal 2001, the forthcoming year, as
follows: Total Tennessee Georgia Florida Sales $ 8,800,000 $
4,400,000 $ 2,800,000 $ 1,600,000 Fixed costs: Factory $ 2,200,000
$ 1,120,000 $ 560,000 $ 520,000 Administration 700,000 420,000
220,000 60,000 Variable costs 2,900,000 1,330,000 850,000 720,000
Allocated home office costs 1,000,000 450,000 350,000 200,000 Total
$(6,800,000) $(3,320,000) $(1,980,000) $(1,500,000) Pretax profit
from operations $ 2,000,000 $ 1,080,000 $ 820,000 $ 100,000 The
sales price per unit is $50....
