Hudson co. reports the contribution margin income statement for 2017.
hudson co.
contribution margin income statement
for year ended december 31, 2017
sales (10,400 units at $280 each) $ 2,912,000
variable costs (10,400 units at $210 each) 2,184,000
contribution margin $ 728,000
fixed costs 567,000
pretax income $ 161,000
exercise 21-17 target income and margin of safety (in dollars) lo c2
1. assume hudson co. has a target pretax income of $170,000 for 2018. what amount of sales (in dollars) is needed to produce this target income?
2. if hudson achieves its target pretax income for 2018, what is its margin of safety (in percent)?

P8-4b dropping unfavorable division based on the following analysis of last year's operations of groves, inc., a financial vice president of the company believes that the firm's total net income could be increased by $160,000 if its design division were discontinued. (amounts are given in the thousands of dollars.) required provide answers for each of the following independent situations: a. assuming that total fixed costs and expenses would not be affected by discontinuing the design division, prepare an analysis showing why you agree or disagree with the vice president. b. assume that the discontinuance of the design division will enable the company to avoid 30% of the fixed portion of cost of services and 40% of the fixed operating expenses allocated to the design division. calculate the resulting effect on net income. c. assume that in addition to the cost avoidance in requirement (b), the capacity released by discontinuance of the design division can be used to provide 6,000 new services that would have a variable cost per service of $60 and would require additional fixed costs totaling $68,000. at what unit price must the new service be sold if groves is to increase its total net income by $180,000?