Reference: 09-08
the Western Company Is Considering the Addition of a New

question 49

Multiple Choice

Reference: 09-08
The Western Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows: $$\begin{array} { | l | l | l | } \hline \text { Annual sales } & 3,000 & \text { units } \\\hline \text { Selling price per unit } & \$ 309 & \\\hline \text { Variable costs per unit: } & & \\\hline \text { Production } & \$ 130 & \\\hline \text { Selling } & \$ 50 & \\\hline \text { Avoidable fixed costs per year: } & & \\\hline \text { Production } & \$ 51,000 & \\\hline \text { Selling } & \$ 75,000 & \\\hline \text { Unavoidable allocated fixed corporate costs per year } & \$ 54,000 & \\\hline\end{array}$$ If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the other existing product lines is expected to drop $78,000 per year.
-If the new product is added next year, the increase in net income resulting from this decision would be:

• A)$183,000.
• B)$261,000.
• C)$207,000.
• D)$387,000.

Identify the types of accounts and entries that appear in different sections of the end-of-period spreadsheet.

Describe the process for preparing financial statements from the end-of-period spreadsheet.

Analyze how adjustments on the end-of-period spreadsheet impact financial statements.

Differentiate between adjusting entries, closing entries, and journal entries.

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Definitions:

Karl Marx

A 19th-century philosopher, economist, and revolutionary socialist best known for his critical theories about capitalism and his ideas that led to the foundation of Marxism.

Political Power

The ability to influence or outright control the behavior of people, typically involving the governance of a state, region, or organization.

Ownership of Capital

The possession of capital assets, including tools, buildings, machines, and financial resources, used to produce goods or services.

Social Consciousness

An awareness shared by individuals within a society regarding social issues, injustices, and the need for social change.