Question

Do It! Review 20-6 Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $480,000, variable expenses of $364,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $34,000. If Gator eliminates the line, $41,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (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 Variable costs Contribution margin Fixed costs Net income / (Loss) The analysis indicates that Gator should the gloves and mittens line.

Answer 1

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		Continue	Eliminate	Net Income
				Increase/(Decrease
Sales		$                         480,000	$                                     -	$                       (480,000)
Variable Expense		$                       (364,000)	$                                     -	$                         364,000
Contribution margin		$                         116,000	$                                     -	$                       (116,000)
Fixed Expense		$                       (150,000)	$                         (41,000)	$                         109,000
Net Income/(Loss)		$                         (34,000)	$                         (41,000)	$                            (7,000)
Continued the gloves and mitten lines as elimination will increase losses by $7,000