C. Merrickville Windows & Doors manufactures Windows, Doors and Solar Panels in a modern plant located in beautiful, historic Merrickville. 49 The following sales and cost information is available relating to the profitability of these three product lines: 50 Notes Windows Doors Solar Panels 51 Sales 750,000 $ 449,000 $ 1,000,000 52 Costs: 53 Direct materials 300,000 197,560 400,000 54 Direct labour 75,000 53,880 80,000 55 Material handling a. 45,000 35,920 60,000 56 Depreciation b. 50,000 48,000 72,000 57 Selling & marketing 75,000 60,000 120,000 58 General administration d 150,000 100,000 200.000 59 Total costs 695,000 495,360 932,000 60 Operating income $ 55,000 $ (46,360) $ 68,000 61 62 The following additional information has been made available to you in the corresponding notes. 63 a. Material handling costs vary directly with the number of units produced. 64 b. Depreciation is calculated using the straight-line method. 65 c. 50% of the selling and marketing costs consist of corporate marketing costs and are allocated to the product lines 66 based on relative product line sales. The balance of the selling and marketing costs is comprised of variable sales commissions. 67 d. General administration costs include product line manager salaries which are: $ 60,000 for Windows line 69 $ 50,000 for the Doors' line 70 $ 65,000 for the Solar Panels' line 71 The balance is made up of costs that are allocated from head office and are not directly related to the product lines. 72 73 e. If the Doors product line is dropped, then its manager would be transferred to head office where she would replace a 74 $ 40,000 per year accounting clerk. 75 76 Required: 77 1. Assuming that the plant space taken up by the Doors product line would remain idle, should the product line be dropped? 78 79 68 ng Clerk. 14 75 76 Required: 77 1. Assuming that the plant space taken up by the Doors' product line would remain idle, should the product line be dropped? 78 79 80 81 82 83 84 85 86 87 88 89 90 91 Net advantage (disadvantage) of dropping Doors line 92 93 94 95 Should the Doors product line de dropped (yes or no) 96 2. Assuming that the idle space could be used by the Solar Panels' product line and that its sales would increase by $ 300,000 should the company discontinue the Doors product line? 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 90 91 Net advantage (disadvantage) of dropping Doors line 92 93 Should the Doors product line de dropped (yes or no) 94 95 96 2. Assuming that the idle space could be used by the Solar Panels product line and that its sales would increase by $ 300,000 should the company discontinue the Doors' product line? 98 97 99 100 101 102 103 104 105 106 107 108 109 110 111 Net advantage disadvantage) of dropping Doors line Should the Doors product line be dropped (yes or no) 112 113 114 115 116 117 118 119 120 121 122 123
