Question

(Click the icon to view the income statement.) Brantly Company manufactures two products. Both products have the same sales price, and the volume of sales is equivalent. However, due to the difference in production processes, Product A has higher variable costs and Product has higher fixed costs. Management is considering dropping Product B because that product line has an operating loss. 9. 10. If fixed costs cannot be avoided, should Brantly drop Product B? Why or why not? If 50% of Product B's fixed costs are avoidable, should Brantly drop Product B? Why or why not? 9. If fixed costs cannot be avoided, should Brantly drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Х Expected decrease in revenue Expected decrease in total variable costs Data Table Expected increase/(decrease) in operating income Brantly drop Product B because operating income will 10. If 50% of Product B's fixed costs are avoidable, should Brantly drop Product B? Why or why not? (Use a minus sign or parentheses to enter a decrease in profits.) Brantly Company Income Statement Month Ended June 30, 2018 Total Product A Product B $ 160,000 $ 80,000 $ 80.000 132,000 66,800 65,200 Net Sales Revenue Expected decrease in revenue Expected decrease in total variable costs Expected decrease in fixed costs Expected decrease in total costs Variable Costs Contribution Margin 28,000 35,000 13,200 3,500 14,800 31,500 Expected increase/(decrease) in operating income Fixed Costs $ (7,000) S 9,700 $ (16,700) Operating Income/(Loss) McCollum drop Product because operating income will Print Done

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement 1:-

Expected decrease in revenue	(80,000)
Expected decrease in variable costs	65,200
Expected (decrease)Increase in Operating Income	(14,800)

Brantly Should not drop Product B because operating income will Decrease

Requirement 2:-

Particulars	Amount	Amount
Expected decrease in revenue		(80,000)
Expected decrease in variable costs	65,200
Expected decrease in fixed costs($31,500 * 50%)	15,750
Expected decrease in total costs		80,950
Expected decrease/Increase in Operating Income		950

Brantly/Mccollum Should drop product B because operating income will Increase.

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