Problem 7 Your Company makes 3 products: A, B, & C. Your Co is considering dropping...

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Problem 7 Your Company makes 3 products: A, B, & C. Your Co is considering dropping product B based on the following financial data from last year: Sales Prod A $600.00 Prod B Prod C $900.00 $360.00 Variable costs $390.00 $720.00 $240.00 Contribution margin $210.00 $180.00 $120.00 Fixed costs: Advertising expense $36.00 $60.00 $15.00 Depreciation of special equipment* $33.00 $54.00 $24.00 Salaries of segment manager $60.00 $96.00 $21.00 Indirect fixed costs $45.00 $60.00 $30.00 Total fixed costs $174.00 $270.00 $90.00 Net operating income (loss) $36.00 -$90.00 $30.00 * The special equipment used exclusively by each segment can be sold for approximately book value Complete the following table to show the effect on Your Co's profit if it keeps or eliminates product B. Keep B Drop B Contribution margin $180.00 X Advertising expense $60.00 X Depreciation of special equipment* $54.00 Salaries of segment manager $96.00 X Indirect fixed costs $60.00 Net operating income (loss) -$90.00 X Incremental profit (loss) X Should Your Co. drop product B? Problem 7 Your Company makes 3 products: A, B, & C. Your Co is considering dropping product B based on the following financial data from last year: Sales Prod A $600.00 Prod B Prod C $900.00 $360.00 Variable costs $390.00 $720.00 $240.00 Contribution margin $210.00 $180.00 $120.00 Fixed costs: Advertising expense $36.00 $60.00 $15.00 Depreciation of special equipment* $33.00 $54.00 $24.00 Salaries of segment manager $60.00 $96.00 $21.00 Indirect fixed costs $45.00 $60.00 $30.00 Total fixed costs $174.00 $270.00 $90.00 Net operating income (loss) $36.00 -$90.00 $30.00 * The special equipment used exclusively by each segment can be sold for approximately book value Complete the following table to show the effect on Your Co's profit if it keeps or eliminates product B. Keep B Drop B Contribution margin $180.00 X Advertising expense $60.00 X Depreciation of special equipment* $54.00 Salaries of segment manager $96.00 X Indirect fixed costs $60.00 Net operating income (loss) -$90.00 X Incremental profit (loss) X Should Your Co. drop product B?