1.Sports Hats, Etc. has two product lines: baseball helmets and football helmets. The contribution

margin format of income statement data for the most recent year follow:

		Baseball Helmetl	Football Helmets
Unit sold		60,000	80,000
Sales Revenue		$2,400,000	$4,000,000
Variable product cost		$1,560,000	$2,800,000
Variable Administrative costs		$198,000	$200,000
Variable marketing costs		$90,000	$100,000
Contribution margin		$552,000	$900,000
Fixed manufacturing costs	$560,000	$280,000	$280,000
Fixed administrative costs	$400,000	$200,000	$200,000
Fixed marketing costs	$320,000	$160,000	$160,000
Operating income	$172,000	($88,000)	$260,000

1-1. Assuming fixed costs remain unchanged, should Sports Hats drop the Baseball Helmets line or not? Explain your decision and present supporting calculations.

1-2. By examining the operation process, as an accountant pointed out that the company can reduce the total fixed administrative costs by 70 % and total fixed marketing costs by 40% if the company drops the baseball Helmets. In this case, are you going to drop the Baseball Helmets line or not? Explain your decision and present supporting calculations.

2. Tsuruha drug store manufactures and sells a Fish oil product for $25 per bottle. Koji Kobayashi, the manager of the store, has the following projections for the year 2020:

Sales $300,000

Variable manufacturing costs $192,000

Operating expenses:

Sales commission $30,000

Insurance expenses for offices $18,250

Rent for plants $50,000

Total expenses - $290,250

Net income $ 9,750

2-1 What is breakeven point of the dollar sales?

2-2 How much is the variable product costs per unit?

2-3 If company wants to make an after tax income of $16,000, how many fish oil must they sell? The tax rate for the company is 21%

2-4 If sales decrease 20% from the current level sales ($300,000), what is the loss or profit for a company? Ignore taxes.

2-5 Present the above relationship in a graph. Clearly show the breakeven point both dollar value and sales unit, the margin of safety when income is $9,750, and situation in 2-4 on the graph. [18 pts]