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Company has three product lines in its retail stores: books, videos, and music. The allocated fixed costs are based on units sold and are unavoidable.
Company has three product lines in its retail stores: books, videos, and music. The allocated fixed costs are based on units sold and are unavoidable. Demand of individual products is not affected by changes in other product lines. Results of the fourth quarter are presented below:
Units sold Revenue Variable departmental costs Direct fixed costs Allocated fixed costs Net income (loss) Books 1,280 $30,720 19,200 3,840 5.632 $2,048 Music 2,560 $61,440 28,160 7,680 11,264 $14,336 Videos 2,560 $38,400 29,440 5,120 11,264 $(7,424) Total 6,400 $130,560 76,800 16,640 28,160 $8.960 Prepare an incremental analysis of the effect of dropping the Video product line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
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