Question
Crocade is a sports drink manufacturer. The firm reported the following information for each flavor line of drink for last accounting period: Lemon-Lime Orange Fruit
Crocade is a sports drink manufacturer. The firm reported the following information for each flavor line of drink for last accounting period:
| Lemon-Lime | Orange | Fruit Punch | Grape |
Sales | $5,400,000 | $1,950,000 | $4,845,000 | $2,106,000 |
Variable costs | $1,920,300 | $560,100 | $1,345,000 | $975,800 |
Fixed costs | $2,170,800 | $1,028,400 | $1,855,200 | $1,390,500 |
Net Operating Income (Loss) | $1,308,900 | $361,500 | $1,644,800 | ($260,300) |
Assume that if the Grape line is dropped, all variable costs can be avoided and 10% of the fixed costs can be avoided. The financial advantage (disadvantage) for the company as a result of eliminating the Grape line is:
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