1.) Charter Sports Equipment manufactures round, rectangular, and octagonal trampolines. Sales and expense data for the past month follow:

Management is concerned about the continued losses shown by the round trampolines and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce the trampolines has no resale value. If the round trampoline model is dropped, the two line supervisors assigned to the model would be discharged.

Required:
1. What is the financial advantage (disadvantage) of discontinuing the round trampolines? The company has no other use for the capacity now being used to produce the round trampolines. Show computations to support your answer.
2. Recast the above data in a format that would be more useful to management in assessing the profitability of the various product lines.

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Trampoline Total Round Rectangular Octagonal Sales...... $1,000,000 $140,000 $500,000 $360,000 Variable expenses.. 410,000 60,000 200,000 150,000 Contribution margin. 590,000 80,000 300,000 210,000 Fixed expenses: Advertising-traceable........ 216,000 41,000 110,000 65,000 Depreciation of special equipment. 95,000 20,000 40,000 35,000 Line supervisors' salaries. 19,000 6,000 7,000 6,000 General factory overhead". 200,000 28,000 100,000 72,000 Total fixed expenses.. 530,000 95,000 257,000 Net operating Income (loss).... $ 60,000 $ (15,000) $ 43,000 178,000 $ 32,000 *A common fixed cost that is allocated on the basis of sales dollars.