Icetreats Ltd makes three types of ice lolly and shares its fixed overheads equally over the three types. A summary of the income statement for last month is shown below.

The sales director has suggested that as sales of all ice lollies are expected to decrease by 10% next month, production of Kool Ice should be stopped until demand picks up. Redraft the above statement, first showing what will happen if there is a 10% decrease in demand, and second, if production of Kool Ice is halted.

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Icetreats Ltd Fruit Ice Choc Ice Kool Ice Total Number of units produced Sales Variable costs 11,200 9,000 6,000 E E E 5,500 4,500 2,400 12,400 [2,400] [1,800] [1,300] (5,500) Contribution 3,100 2,700 1,100 6,900 Fixed costs [2,000] [2,000] (2,000) 16,0001 Profit/(loss) for the period 1,100 700 (900) 900