Segment Analysis and Opportunity Costs
Assume that sales of Kevlar at DuPont have dropped significantly. DuPont reported the following
results for this product line for the past month and expects this sales pattern to continue
into the future.

1. Assume that approximately 30% of the fixed manufacturing overhead and none of the
sales and administrative costs can be avoided if Kevlar is dropped. In order to determine
the “true performance” of the Kevlar product line, what is its incremental segment
profit or loss?
2. If DuPont were to drop the Kevlar product line and use the available resources to produce
another product that provided an incremental profit of $3,500,000, what is the
overall economic profit or loss of the Kevlar product line?

Transcribed Image Text:

Operating Statements Sales revenue Variable manufacturing costs Fixed manufacturing overhead Sales and administrative costs Operating profit Kevlar $7,500,000 (2,700,000) (1,500,000) (4,100,000) $ (800,000)