Question
Cake Boss has the following income statement for 2019 : Cake Chocolate Red velvet Banana Cake Cake Total Sales $ 50,000 $ 15,000 $ 40,000
Cake Boss has the following income statement for 2019 : Cake Chocolate Red velvet Banana Cake Cake Total Sales $ 50,000 $ 15,000 $ 40,000 $ 105,000 Cost of goods sold 24.000 8.000 19,000 51.000 Contribution margin $ 26,000 $ 7,000 $ 21,000 $ 54,000 Delivery and ordering costs 1,000 500 800 2,300 Rent ( per sq . metre used " ) 5,000 3,000 4,000 12,000 Allocated corporate costs 5.000 5.000 5.000 15.000 Corporate profit $ 15,000 $ ( 1,500 ) $ 11,200 $ 24,700 The company pays for the entire space and allocates based on sq . metres used . a Do you recommend discontinuing the Red Velvet Cake product line ? Why or why not ? b . If the Chocolate Cake product line had been discontinued , corporate profits for the current year would have decreased by what amount c What factors should be taken into account is the company wants to eliminate any of the products ?
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