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Cullumber Company has three product lines in its retail stores: books, videos, and music. The allocated fixed costs are based on units sold and are
Cullumber 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: Books Music Videos Total Units sold 1,060 2,120 2,120 5,300 Revenue $25,440 $50,880 $31,800 $108,120 Variable departmental costs 15,900 23,320 24,380 63,600 3,180 6,360 4,240 13,780 Direct fixed costs Allocated fixed costs 4,664 9,328 9,328 23,320 Net income (Loss) $1,696 $11,872 $(6,148) $7,420 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).) Incremental revenue $ Incremental savings on variable costs Incremental savings on direct fixed costs
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