a.
Effect on Net income | ||
Sales | $960,000 | $(960,000) |
Variable Expenses: | ||
Variable production costs | 464,000 | 464,000 |
Sales commissions | 144,000 | 144,000 |
Total variable expenses | ||
Contribution margin | 352,000 | (352,000) |
Fixed Expenses: | ||
Salary of product manager | 100,000 | 100,000 |
Fixed product advertising | 160,000 | 160,000 |
Total avoidable fixed expenses | 260,000 | 260,000 |
Net income | $92,000 | $(92,000) |
Annual financial disadvantage of dropping product JMS7 is $92,000
b.
Annual financial disadvantage of dropping product JMS7 is $2,000 (90,000-92,000)
Question 3 Bubbles Corporation manufactures and sells a number of products, including a product called JMS7....
Question 3 Bubbles Corporation manufactures and sells a number of products, including a product called JMS7. Results for last year for the manufacture and sale of JMS7s are as follows: Sales $ 960,000 Less expenses: Variable production costs $ 464,000 Sales commissions 144,000 Salary of product manager 100,000 Fixed product advertising 160,000 Fixed manufacturing overhead 132,000 1,000,000 Net operating loss $ (40,000 ) Bubbles is trying to decide whether to discontinue the manufacture and sale of JMS7s. All expenses other...
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