Question

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $5,000 from sales $199,000, variable costs $175,000, and fixed costs $29,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Continue		Eliminate		Net Income Increase (Decrease)
Sales		$enter sales in dollars		$enter sales in dollars		$enter sales in dollars
Variable costs		enter variable costs in dollars		enter variable costs in dollars		enter variable costs in dollars
Contribution margin		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
Fixed costs		enter fixed costs in dollars		enter fixed costs in dollars		enter fixed costs in dollars
Net Income / (Loss)		$enter net income or loss in dollars		$enter net income or loss in dollars		$enter net income or loss in dollars

The Big Bart product line should be select an option eliminatedcontinued .

Answer 1

Correct answer-----------The Big Bart product line should be Continued

The discontinue of product line will increase loss from $ 5000 to $20000, which is an increase in loss of $15000.

So its better to continue

Continue	Eliminate	Net income increase (Decrease)
$    199,000.00		$   (199,000.00)
$    175,000.00		$     175,000.00
$      24,000.00	$                    -	$     (24,000.00)
$      29,000.00	$     20,000.00	$          9,000.00
$      (5,000.00)	$   (20,000.00)	$     (15,000.00)