Do It! Review 20-6

Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $488,000, variable expenses of $368,000, and fixed expenses of $143,000. Therefore, the gloves and mittens line had a net loss of $23,000. If Gator eliminates the line, $42,000 of fixed costs will remain. Develop analysis showing whether the company should eliminate the gloves and mittens line.

Continue Eliminate Net Income

Increase (Decrease)

Sales $_________ $________ $________________

Variable Costs _________ ________ ________________

Contribution Margin _________ _________ _________________

Fixed Costs _________ __________ _________________

Net Income/ (Loss) $ __________ $___________ $________________

The analysis indicates that Gator should(not eliminate) or (eliminate) the gloves and mittens line.