Maxley Markets Company sells logo sports merchandise and does custom embroidery

Maxley Markets Company sells logo sports merchandise and does custom embroidery. They are trying to decide whether or not to continue embroidery. The following information is available for the segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if the embroidery were dropped.

Embroidery Apparel Sales
Sales $120,000 $420,000
Variable Costs $90,000 $220,000
Contribution Margin $30,000 $200,000
Direct Fixed Costs $18,000 $70,000
Allocated Common Fixed Costs $20,000 $70,000
Net Income ($ 8,000) $ 60,000

(a) What would be the impact on profits if embroidery was dropped?
(b) Assume that if embroidery was dropped, apparel sales would increase 20%. What is the impact on contribution margin and net income?
(c) Give an example of a cost that is not relevant in this analysis.


Click here for the solution: Maxley Markets Company sells logo sports merchandise and does custom embroidery

Green Co. has signed a long-contract to build a new sports arena

Green Co. has signed a long-contract to build a new sports arena. The total revenue related to the contract is $520 million. Estimated costs for the building the arena are $180 million in the first year and $130 million in both the second and third year. The costs cannot be reasonably estimated. How much revenue should Green Co. report in their first year under iGAAP.

Click here for the solution: Green Co. has signed a long-contract to build a new sports arena

Billy has created a device called a TowRack which is a rack for carrying sports equipment such as bikes, skis, and kayaks

Billy has created a device called a TowRack which is a rack for carrying sports equipment such as bikes, skis, and kayaks. What makes this item different from other racks is that it attaches to a vehicle's trailer hitch and has a single wheel to help support the weight of the rack and items attached to it. Because it is so much lighter than a regular trailer, it can be used on even the smallest of cars that are not designed to tow regular trailers. Because of the success of this product, competitors introduce similar products. But because of the initial success of Billy's TowRack, all of these similar products are often referred to as TowRacks. Billy has also written a book about using "TowRacks" and safe driving techniques for driving with TowRacks and would like to obtain a copyright for the book. Discuss Billy's legal situation, including patent, trademark and copyright issues.

Click here for the solution: Billy has created a device called a TowRack which is a rack for carrying sports equipment such as bikes, skis, and kayaks