Question
6. A company is trying to decide whether or not it should drop a product segment. The segment has the following costs and sales: Sales
6. A company is trying to decide whether or not it should drop a product segment. The segment has the following costs and sales: Sales $220,000 Variable Expenses $90,000 Supervisor's Salary $40,000 Advertising $20,000 Utilities $10,000 Property Taxes $11,000 Depreciation of Equipment $30,000 Other Overhead $16,000 No other use can be found for the floor space and equipment being used to produce the product, and the other overhead must still be paid regardless of the firms decision. The supervisor will be laid off if the segment is discontinued. Why should the company continue or discontinue the segment?
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