Suppose that Flyaway Company also produces the Windy model fan, which currently has a net loss of

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Suppose that Flyaway Company also produces the Windy model fan, which currently has a net loss of $$40,000$ as follows:

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Eliminating the Windy product line would eliminate $$20,000$ of direct fixed costs. The $$50,000$ of common fixed costs would be redistributed to Flyaway’s remaining product lines.

Determine whether Flyaway should eliminate the Windy fan line and explain why or why not.

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Managerial Accounting

ISBN: 9780078110771

1st Edition

Authors: Stacey WhitecottonRobert LibbyRobert Libby, Patricia LibbyRobert Libby, Fred Phillips

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Question Posted: May 15, 2024 04:00 AM

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Suppose that Flyaway Company also produces the Windy model fan, which currently has a net loss of

Question:

Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Profit Windy Model $160,000 130,000 $ 30,000 20,000 $ 10,000 50,000 $ (40,000)

Step by Step Answer:

Squaring the imagewe can see that the Windy model fan has a net loss of 40000which is calculated as follows Sales revenue 160000 Less Variable costs 130000 Contribution margin 30000 Less Direct fixed ...View the full answer

Managerial Accounting

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