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07 Appliances-R-Us has three main product lines, as follows: 1.00 F Blenders Coffee Makers Toasters Total Sales Revenue 750,000 1,000,000 250,000 $2,000,000 Variable Costs 320,000
07 Appliances-R-Us has three main product lines, as follows: 1.00 F Blenders Coffee Makers Toasters Total Sales Revenue 750,000 1,000,000 250,000 $2,000,000 Variable Costs 320,000 550,000 100,000 970,000 Contribution Margin 430,000 450,000 150,000 1,030,000 Direct Fixed Costs 390,000 320,000 70,000 780,000 56,250 75,000 18,750 150,000 Allocated Fixed Costs (based on sales revenue) Profits (16,250) 55,000 61,250 100,000 Appliances-R-Us is contemplating dropping their line of toasters; according to their CEO, who after looking at their diminutive revenue, said the line is "too small to worry about only a bit of burnt toast." Using differential analysis, recommend if the toaster line should be dropped and determine what the impact of dropping toasters will be for Appliances-R-Us. ; : O a. The line of toasters should be discontinued because the overall profitability will increase by $80,000. b. The line of toasters should not be discontinued because the overall profitability will decrease by $20,000. c. The line of toasters should not be discontinued because the overall profitability will decrease by $80,000. d. The line of toasters should be discontinued because the overall profitability will increase by $20,000
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