Question
Differential Analysis #2 - The Gathering Sound, Ltd. The Gathering Sound, Ltd. has three divisions for selling music: Cassette, Vinyl, and CD. The divisions have
Differential Analysis #2 - The Gathering Sound, Ltd.
The Gathering Sound, Ltd. has three divisions for selling music: Cassette, Vinyl, and CD. The divisions have the following revenues and expenses for June 2022:
Cassette | Vinyl | CD | |
Revenues | $82,000 | $430,000 | $299,000 |
Variable Costs | $60,400 | $173,800 | $155,000 |
Fixed Costs: | |||
Advertising | $4,000 | $10,000 | $15,000 |
Division manager's salary | $36,000 | $38,000 | $40,000 |
Other | $35,000 | $91,300 | $52,000 |
TOTAL | ($53,400) | $116,900 | $37,000 |
The management of The Gathering Sound is considering the elimination of the Cassette Division. If the Cassette Division were eliminated, assume that all variable costs, Advertising costs, and the Division manager's salary could all be avoided. However, the 'Other' fixed costs are unavoidable and would be unaffected by the decision to drop the Cassette line.
Calculate the effect on The Gathering Sound's profits as a whole if the Cassette line were to be eliminated. Enter your answer as a positive number if the effect is an increase in profits, and enter your answer as a negative number if the effect is a decrease in profits. Please enter your answer in whole dollars and include only numerals (i.e., do not include a $).
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