5)

The management accountant for the Candy Company has prepared the following income statement for the most current year:

Chocolate Other Candy Fudge Total

Sales $40,000 $25,000 $35,000 $100,000

Cost of goods sold 26,000 15,000 19,000 60,000

Contribution margin 14,000 10,000 16,000 40,000

Delivery and ordering costs 2,000 3,000 2,000 7,000

Rent (per sq. foot used) 3,000 3,000 2,000 8,000

Allocated corporate costs 5,000 5,000 5,000 15,000

Corporate profit $4,000 $(1,000) $7,000 $10,000

a. Do you recommend discontinuing the Other Candy product line? Why or why not?

b. If the Candy product line had been discontinued, corporate profits for the current year would have decreased by what amount?