Question

less cost of goods sold $1,450,000 942.500 507,500 $1,116.500 12.000 52,566.00 1.754.900 Les directed costs: 182,700 182,700 55,025 365.400 less alocated foxed costs: Insurance 10, 412 2,391 2.875 60,003 23.442 5,581 13030 3.190 3,580 65,940 5,220 $177,015 President's salary 126,023 14,820) Determine whether to should come the future in the face cost of

Answer 1

Benefit of dropping a product line = Fixed costs avoided- Contribution margin lost on the product line + Additional contribution margin from another product line

= 182,700+55,825 - 304,500 + 507,500*13%

=$0

Hence, net income will remain the same as 162,915

The company is indifferent between dropping and keeping

Note: allocated fixed costs are irrelevant since unavoidable