Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Air Mall produces a catalog that is placed in airline seatbacks during international flights. Passengers typically skim the catalog during flights and can buy selected
| Air Mall produces a catalog that is placed in airline seatbacks during international flights. Passengers typically skim the catalog during flights and can buy selected merchandise from flight attendants, duty and tax free, while over international waters. Below is a report for a recent period: | ||||
| Total | Beverages | Jewelry | Electronics | |
| Sales | $ 2,600,000 | $ 1,400,000 | $ 500,000 | $ 700,000 |
| Variable expenses | 1,635,000 | 980,000 | 200,000 | 455,000 |
| Contribution margin | $ 965,000 | $ 420,000 | $ 300,000 | $ 245,000 |
| Fixed expenses | 900,000 | 300,000 | 300,000 | 300,000 |
| Income (loss) | $ 65,000 | $ 120,000 | $ - | $ (55,000) |
| The fixed expense is the amount paid for printing the catalog and paying the airline to include the item in seatbacks. Management is evaluating discontinuing the sale of electronics products. Fixed costs will not change; however, jewelry sales are expected to increase by 30%. | ||||
| Determine if overall income will be improved if the sale of electronics products is ceased. | ||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started