Refer to the information for Hickory Company above. Assume that dropping the parquet product line would reduce
Question:
Required:
1. If the parquet product line is dropped, what is the contribution margin for the strip line? For the plank line?
2. Which alternative (keep or drop the parquet product line) is now more cost effective and by how much?
Strip Plank Pague Total Sales revenue Less: Variable expenses Contribution margin Less: Direct fixed expenses $400,000 $200,000 300,000 $900,000 225000120,000 1250000) 595,000 175,000 80,000 50,000 $305,000 Mochine rent Supervision Depreciation (5,000) (20,000) 30,000 (55,000 15,000 (10,000) 35,000(1o (5,000) (30,000 (25,000) (10,000) 0 Segment margin 40,000
Step by Step Answer:
1 Previous contribution margin of the strip line was 175000 A 25 percent decrease in sales implies a ...View the full answer
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
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