Question

The CPBS division (British Flavors) of Cam Bowles Soup Company is broken down into the following 4 soups; Cream of Tomato, Pea and Ham, Roasted Cauliflower & Turmeric, and Smoked Haddock Chowder.

The total fixed expenses do not change, and they are allocated to each division proportionally based on sales dollars.

The following is a side by side comparison of each soup's income statement

Roasted Cauliflower   

& Turmeric Cream of Tomato Smoked Haddock Chowder Pea and Ham

Sales $4,860,000    $9,760,000   $4,380,000             $5,300,000

COGS   $2,246,000                  $3,924,000    $1,763,000    $2,138,000

Gross Margin                  $2,614,000                  $5,836,000                $2,617,000    $3,162,000

Variable Expenses    $1,957,800    $2,036,800               $1,343,400   $1,067,000

Fixed Expenses              $1,069,200    $2,147,200 $963,600    $1,166,000

Total Expense                $3,027,000                  $4,184,000               $2,307,000             $2,233,000

Income from Oper.         - $413,000                   $1,653,000               $  310,000             $   929,000

What is the change in income from operations if the Roasted Cauliflower & Turmeric Soup is discontinued?

		$2,201,000 decrease
		$656,200 decrease
		$413,000 decrease
		$413,000 increase

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

1 Answer 2 The correct answer is $ 656200 Decrease 3 4 5 Calculation 6 7 Change in income from operations if roasted cauliflower and Turmeric soup is discountinued 8Sales revenue Relevant cost 9sales revenue-COGS-Variable cost 104860000-2246000-1957800 11 $656200 Decrease 12 13 Thus the correct answer is $ 656200 decrease