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Current Attempt in Progress Oak Village sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's
Current Attempt in Progress Oak Village sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's retail floor space. The president of Oak Village is trying to decide whether the company should continue offering office furniture or concentrate on home furniture. Below is a product line income statement for the company. If office furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of home furniture can increase by 16 percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales. Home Furniture Sales Office Furniture $1,445,000 $1,112,650 $2,557,650 Total Less cost of goods sold 939,250 809,200 1,748,450 Contribution margin 505,750 303,450 809,200 Less direct fixed costs: Salaries 182,070 182,070 364,140 Other 60,690 60,690 121,380 Less allocated fixed costs: Rent 14,650 10,590 25.240 Insurance 3,680 2,675 6,355 Cleaning 3,830 2.853 6,683 President's salary 71,470 56,434 127,904 Other 6,840 5,590 12,430 Net income/(loss) $162,520 $(17,452) $145,068 Determine whether Oak Village should discontinue the office furniture line and the financial benefit (cost) of dropping it. (Round answer to O decimal places, e.g. 5,275.) Net income without Office Furniture is $ .The company
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