Question
Based on the segment income statement below, Gourmet Sorbet is considering eliminating its Mango Tango line. Revenue from Mango Tango sales $500,000 Salaries for Mango
Based on the segment income statement below, Gourmet Sorbet is considering eliminating its Mango Tango line.
Revenue from Mango Tango sales | $500,000 |
Salaries for Mango Tango workers | (120,000) |
Direct material costs for Mango Tango | (300,000) |
Sunk costs (equipment depreciation) | (75,000) |
Allocated company-wide facility-sustaining costs | (50,000) |
Net loss | $ (45,000) |
1. The total relevant costs in this decision add up to
a. $400,000.
b. $475,000.
c. $525,000.
d. $420,000.
2. If Mango Tango were eliminated, profitability would
a. increase $25,000.
b. increase $525,000.
c. decrease $80,000.
d. decrease $100,000.
Please show the necessary calculations, thanks!
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