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D-Home Company manufacturers three items: D1, D2 and D3. The management is considering dropping item D3 because it has an operating loss. D1 Sales
D-Home Company manufacturers three items: D1, D2 and D3. The management is considering dropping item D3 because it has an operating loss. D1 Sales Revenues $ 52,000 Variable Costs (9,000) D2 $ 90,000 (62,000) Contribution Margin Fixed Cost 43,000 (15,000) 28,000 (23,000) D3 $ 75,000 (50,000) 25,000 (36,000) Net Income Requirements: $ 28,000 $ 5,000 $ (11,000) 1- Assume the fixed costs are unavoidable, Should D-Home drop item D3? 2- Assume 75% the fixed costs are avoidable, Should D-Home drop item D3?
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