Question

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $6,600 from sales $200,000, variable costs $176,000, and fixed costs $30,600. If the Big Bart line is eliminated, $20,600 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 continuedeliminated .

Answer 1

Solution

	Continue	Eliminate	Net Income Increase (Decrease)
Sales	$      200,000.00		$ (200,000.00)
Variable expenses	$      176,000.00		$    176,000.00
Contribution margin	$        24,000.00	$                        -	$    (24,000.00)
Fixed expenses	$        30,600.00	$        20,600.00	$       10,000.00
Net Operating Income (Loss)	$        (6,600.00)	$      (20,600.00)	$    (14,000.00)

.

The Big Bart product line should be Continued

.

Discontinuation will increase loss of the company so its better to continue.