Question
3. Operating results for the Westmeyer Writing Company were disappointing last year as shown below: Pens Pencils Erasers Total Sales $150,000 $100,000 $ 50,000 $300,000
3. Operating results for the Westmeyer Writing Company were disappointing last year as shown below:
Pens Pencils Erasers Total
Sales $150,000 $100,000 $ 50,000 $300,000
Variable costs (90,000) (50,000) (35,000) (175,000)
Fixed costs:
Discretionary (20,000) (15,000) (5,000) (40,000)
Committed (15,000) (15,000) (15,000) (45,000)
Net income $ 25,000 $ 20,000 $ (5,000) $ 40,000
In order to improve profits for next year, the president may drop the Eraser Division. What would be the impact on the profits for the next year if Erasers are discontinued?
What are some qualitative factors to consider if the Erasers Division is discontinued?
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