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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.