Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company currently has two product lines and is considering dropping Product 4 5 6 . Product 1 2 3 Product 4 5 6 Total

A company currently has two product lines and is considering dropping Product 456.
Product 123
Product 456
Total
Sales revenue
$20,000
$10,000
$30,000
Cost of goods sold (all variable)
$5,000
$4,000
$9,000
Contribution margin
$15,000
$6,000
$21,000
Fixed costs*
$9,000
$8,000
$17,000
Operating Profit (Loss)
$6,000
($2,000)
$4,000
If Product 456 is dropped, $5,000 of its total fixed costs will be saved. The other $3,000 will continue.
Based on this information, dropping Product 456 will (increase/decrease)
profits by $
.(Enter increase or decrease and the profit change as a whole number.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding Financial Accounting A Guide For Non-specialists

Authors: Jimmy Winfield, Mark Graham, Taryn Miller

1st Edition

0198847270, 9780198847274

More Books

Students also viewed these Accounting questions

Question

What is the message frequency?

Answered: 1 week ago

Question

What is the schedule for this project?

Answered: 1 week ago

Question

Who is responsible for this project?

Answered: 1 week ago