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    20 7a

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    Reynante Dap-og
    The document compares the costs and profits of raising two types of fish: clownfish and queen angelfish. It finds that queen angelfish have higher total revenue and operating income. It then evaluates two proposed investments to improve conditions and yields. The first involves a better filter to increase survival rates and reduce costs, increasing profits the most. The second uses more efficient equipment but yields smaller profit gains. Therefore, the first investment option should be undertaken, focusing production on queen angelfish.

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    20 7a

    Uploaded by

    Reynante Dap-og
    217 views4 pages
    The document compares the costs and profits of raising two types of fish: clownfish and queen angelfish. It finds that queen angelfish have higher total revenue and operating income. It then evaluates two proposed investments to improve conditions and yields. The first involves a better filter to increase survival rates and reduce costs, increasing profits the most. The second uses more efficient equipment but yields smaller profit gains. Therefore, the first investment option should be undertaken, focusing production on queen angelfish.

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    20.7A

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    The document compares the costs and profits of raising two types of fish: clownfish and queen angelfish. It finds that queen angelfish have higher total revenue and operating income. It then evaluates two proposed investments to improve conditions and yields. The first involves a better filter to increase survival rates and reduce costs, increasing profits the most. The second uses more efficient equipment but yields smaller profit gains. Therefore, the first investment option should be undertaken, focusing production on queen angelfish.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    217 views4 pages

    20 7a

    Uploaded by

    Reynante Dap-og
    The document compares the costs and profits of raising two types of fish: clownfish and queen angelfish. It finds that queen angelfish have higher total revenue and operating income. It then evaluates two proposed investments to improve conditions and yields. The first involves a better filter to increase survival rates and reduce costs, increasing profits the most. The second uses more efficient equipment but yields smaller profit gains. Therefore, the first investment option should be undertaken, focusing production on queen angelfish.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 4

    Revenue

    Incremental Cost:
    Cost of eggs

    ClownFish ($4)
    Queen Angelfish ($10)
    $
    400,000.00 $
    500,000.00

    water change costs


    Heating and ligthing cost
    feeding costs
    Fixed Cost
    Total Incremental Cost
    Profit Segment

    $
    $

    5,500.00
    35,000.00
    14,000.00
    78,750.00
    80,000.00
    213,250.00 $
    186,750.00 $

    9,500.00
    100,000.00
    20,000.00
    150,000.00
    80,000.00
    359,500.00
    140,500.00

    1. Which species should Percula raise to earn the highest operating income for the year?
    The Maroon Clownfish provides highest operating income amoung the two.

    2. Other than fixed costs, which factors or categories of costs seem to have the greatest influence on operating inc

    The other category of cost that have a greatest influence in the operating income are the variable co
    and incremental cost. Those costs affect the operating income because these are directly involved in
    operation or in course of the business. These are costs that cannot be accumulated without productio
    3. Charlies manager is considering the following improvements, each of which will cost an additional
    year. Due to resource limitations, only one can be implemented.

    1. Purchasing a higher quality filter material that will significantly improve water conditions in the rear
    tanks. The higher water quality will increase the survival rates to 12 percent for clownfish and 6 perce
    for angelfish. The need for water changes will also be reduced to one each week for angelfish. Due to
    higher yields, feeding costs will increase to $160 each.

    Revenue
    Incremental Cost:
    Cost of eggs

    water change costs


    Heating and ligthing cost
    feeding costs
    Total Incremental Cost
    Profit Segment

    Fixed Cost
    Additional Cost to Improve
    Operating Profit

    ClownFish ($4)
    Queen Angelfish ($10)
    480,000.00
    600,000.00
    5,500.00
    35,000.00
    14,000.00
    84,000.00
    138,500.00
    341,500.00
    80,000.00
    8,000.00
    253,500.00

    9,500.00
    50,000.00
    20,000.00
    160,000.00
    239,500.00
    360,500.00
    80,000.00
    8,000.00
    272,500.00

    2. Installing newer, more efficient equipment that will reduce heating and lighting costs to $300 per w
    of rearing. The new equipment will promote more stable conditions, increasing the survival rates of
    clownfish to 10.5 percent and of angelfish to 5.5 percent. The slight change in survival rates is not
    expected to increase feeding costs.

    2. Installing newer, more efficient equipment that will reduce heating and lighting costs to $300 per w
    of rearing. The new equipment will promote more stable conditions, increasing the survival rates of
    clownfish to 10.5 percent and of angelfish to 5.5 percent. The slight change in survival rates is not
    expected to increase feeding costs.

    Revenue
    Incremental Cost:
    Cost of eggs

    water change costs


    Heating and ligthing cost
    feeding costs
    Total Incremental Cost
    Profit Segment

    Fixed Cost
    Additional Cost to Improve
    Operating Profit

    ClownFish ($4)
    Queen Angelfish ($10)
    420,000.00
    550,000.00
    5,500.00
    35,000.00
    10,500.00
    84,000.00
    135,000.00
    285,000.00
    80,000.00
    8,000.00
    197,000.00

    9,500.00
    50,000.00
    15,000.00
    160,000.00
    234,500.00
    315,500.00
    80,000.00
    8,000.00
    227,500.00

    Using the answer for Part B, the First option is very beneficial because the contribution margin for opt
    1 is more than option 2.

    4. Perform the necessary calculations to check if your answer to part c was correct. Should either of the investments
    undertaken, and if so, which fish species should be raised

    Using the calculation on Part 3, the investment should be undertaken because it provides more bene
    to the company as a whole. The numbers above suggest choose Queen anglefish.

    Total
    $

    900,000.00

    $
    $

    15,000.00
    135,000.00
    34,000.00
    228,750.00
    160,000.00
    572,750.00
    327,250.00

    amoung the two.

    greatest influence on operating income?

    ng income are the variable cost


    these are directly involved in the
    ccumulated without productions.

    which will cost an additional $8,000 for the


    n be implemented.

    e water conditions in the rearing


    cent for clownfish and 6 percent
    ch week for angelfish. Due to the

    Total
    1,080,000.00
    15,000.00
    85,000.00
    34,000.00
    244,000.00
    378,000.00
    702,000.00
    160,000.00
    16,000.00
    526,000.00

    d lighting costs to $300 per week


    easing the survival rates of
    nge in survival rates is not

    Total
    970,000.00
    15,000.00
    85,000.00
    25,500.00
    244,000.00
    369,500.00
    600,500.00
    160,000.00
    16,000.00
    424,500.00

    he contribution margin for option

    t. Should either of the investments be


    raised

    ecause it provides more benefits


    ose Queen anglefish.

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