Carla Vista has three product lines in its retail stores: kites, wind socks, and flags. Results of
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Question:
Carla Vista has three product lines in its retail stores: kites, wind socks, and flags. Results of the fourth quarter are presented below:
Kites | Wind Socks | Flags | Total | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Units sold | 1,180 | 2,360 | 2,360 | 5,900 | |||||||
Revenue | $25,960 | $47,200 | $27,140 | $100,300 | |||||||
Variable departmental costs | 20,060 | 25,960 | 14,160 | 60,180 | |||||||
Direct fixed costs | 1,180 | 3,540 | 2,360 | 7,080 | |||||||
Allocated fixed costs | 9,440 | 9,440 | 9,440 | 28,320 | |||||||
Net income (loss) | $(4,720) | $8,260 | $1,180 | $11,800 |
The allocated fixed costs are unavoidable. Demand of individual products is not affected by changes in other product lines. What will happen to profits if Carla Vista discontinues the Kites product line?
If Carla Vista discontinues the Kites product line, there will be a select an option droprise in profit by $enter a dollar amount |
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