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  • 1.  Question

    Posted 09-29-2019 06:18 PM
    Somebody pls explain this?


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    Riwang Wang
    Student
    Scarborough ON
    Canada
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  • 2.  RE: Question

    Posted 09-30-2019 01:28 AM
    here, 21k cannot be eliminated so the remaining amount left is 48k-21k i.e. 27k.
    then deduct 27k from contribution margin of 24k, it will come as 3k then apply tax on it
    3k*0.7= 2100



    Original Message


  • 3.  RE: Question

    Posted 09-30-2019 02:35 AM
    ​- 24 k contribution matgin
    + 48 k allocation
    - 21 k thereof can not be elminated

    = +3 k

    - 30 % tax

    = +2.1 k

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    Klaus Weidl
    HIM GmbH
    Biebesheim
    Germany
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    Original Message


  • 4.  RE: Question

    Posted 09-30-2019 03:04 AM
    24K is the CM that goes away. 27K is the avoidable portion of the allocation which is not incurred any longer because the segment is discontinued. The net result is a 3K loss before the effect of taxes. Taxes at 30% on a 3K loss gives a 900 credit. Therefore the final result is an loss reduction of 3K - 900 = 2.1K.
    Does it make sense?

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    Giulio La Bua
    Manager
    OPENTEXT
    Munich
    Germany
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    Original Message


  • 5.  RE: Question

    Posted 09-30-2019 04:50 AM
    Hello
    Please find below my answer:

    If operational the pre-tax loss is:
    24,000 - 48,000 = (24,000)
    After tax is 24,000 * 0.7 = (16,800)

    If you discontinue the business Revenue and cost are zero.
    But in this case loss of 21,000 will stay
    the pre-tax loss is: (21,000)
    After tax is 21,000 * 0.7 = (14,700)

    The loss is 2,100 less

    Best regards
    Robbert

    Sent from my iPad


    Original Message


  • 6.  RE: Question

    Posted 09-30-2019 09:52 AM
      |   view attached
    Please kindly check my answer...
    I don't know whether it is true or no...



    Original Message


  • 7.  RE: Question

    Posted 09-30-2019 10:46 AM
    The 21,000 that can be eliminated should be subtracted from the allocation of overhead to determine the relevant costs.  

    24,000 - 48,000 + 21,000 = (3,000) 

    (3,000) after tax is (3,000) * .7  = (2,100).  So if you eliminate that unit you will increase the bottom line by 2,100.

    Hope that helps



    Original Message


  • 8.  RE: Question

    Posted 09-30-2019 10:51 AM
    I think this is the answer: First calculate the net pre-tax profit change which is 1) negative 24,000 for eliminating the contribution margin & 2) 48,000 - 21,000 = +27,000 in other overhead costs that can be eliminated

    -24,000 +27,000 equals a net pre-tax profit gain of 3,000. Finally, step 3) After tax is (1-tax rate of 0.3) = 2,100.

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    Christopher Neu
    Director/Manager
    Miami FL
    United States
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    Original Message


  • 9.  RE: Question

    Posted 09-30-2019 11:12 AM
    If the division is discontinued it will see the elimination of $24,000  of revenue and $27,000 (48000-21000) in fixed costs.

    So net impact before tax is a positive $3,000 (27,000-24,000=3,000)
    Tax impact is $900 (.30*3000).

    Net benefit after tax of eliminating the division is therefore  $2100 (3000-900)

    Key is that some but not all fixed costs can be eliminated as per the given information.  And of course the tax man gets his share of the net pre-tax savings.


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    Timothy Howard
    Director/Manager
    Pembroke Pines FL
    United States
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    Original Message


  • 10.  RE: Question

    Posted 09-30-2019 06:53 PM
    24000-21000= 3000 * (1-0.3)= 2100

    Sent from my iPad


    Original Message


  • 11.  RE: Question

    Posted 10-05-2019 03:30 AM
    Savings will be $24,000 CM and (48000-21000) $27,000 OH. 
    Therefore calculation will be 24000 - 27000 = 3000 Savings - 30% = 2100 Increase in Operating profit.

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    VINAY S S
    Student
    BANGALORE
    India
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    Original Message


  • 12.  RE: Question

    Posted 10-05-2019 09:01 AM
    They were losing 24000 after applying overhead prior to elimination. After elimination they are only losing 21000 resulting in a 3000 increase. (1-.3)x3000= 2100

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    Craig Calvert
    Analyst
    Brandenburg KY
    United States
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    Original Message