Question

Cullumber Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $495,000, variable expenses of $363,000, and fixed expenses of $148,000. Therefore, the gloves and mittens line had a net loss of $16,000. If Cullumber eliminates the line, $39,000 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 Cullumber should not eliminate or eliminate the gloves and mittens line.

Answer 1

Net income Increase |( Decrease) Eliminate Continue Sales 495000 -495000 Varaible cost contribution Margin Fixed cost 363000 363000 132000 -132000 39000 148000 109000 Net income (loss) -16000 -39000 -23000 The Analysis indicates that Cullumber should not Eliminate the Gloves and Mitten Lines