Dropping Product Lines: New England Ski Company is presently operating at 75 percent of capacity. Worried about the company's performance, the president is considering dropping the company's line of cross-country skis. If the cross-country skis are dropped, the revenue associated with cross-country skis would be lost and the related variable costs would be saved. In addition, fixed costs for the company would be reduced by 20 percent of the total fixed costs. Segmented income statements appear as follows:

Required: Prepare a differential cost schedule like the one in Illustration 12-7 to indicate whether New England Ski Company should drop the cross-country ski product line.

Transcribed Image Text:

Product Downhill Cross- Regular Racing Country Downhill Skis Skis Skis Sales $32,600 $42,800 $51,200 Variable costs 22,000 38,000 40,100 Contribution margin 10,600 4,800 11,100. Fixed costs allocated to each product line 4,700 5,600 7,100 Operating profit (loss) $ 5,900 $ (800) $ 4,000