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Dover Inc. prepared monthly operating income for the month of April below. Additional information related to the month was as follows: Sales Variable Costs
Dover Inc. prepared monthly operating income for the month of April below. Additional information related to the month was as follows: Sales Variable Costs Contribution Margin Direct Fixed Expenses Line Segment Margin Allocated Fixed Expenses Line A Line B Line C 87,000 $ 74.000 125,000 $ 89.000 220.000 116.000 13.000 36.000 104.000 12.000 32.000 75.000 1,000 4,000 29.000 6.000 6.000 -5.000 -2000 15.000 14.000 1. 80% of all direct fixed expenses are avoidable if a line is discontinued 2. Dover allocates common fixed expenses to each line on the basis of sales dollars. Allocated fixed expenses are unavoidable 3. The controller for the company estimated that discontinuing line A would result in a 15% increase in Line C sales and discontinuing Line B would result in a 20% increase in Line C sales 4. April results are representative of what a typical month for the company's operations look like REQUIRED A) Calculate the net benefit or loss of discontinuing line A. Use incremental analysis (do not use an income statement 1) Calculate the net benefit or loss of discontinuing line B. Use incremental analysis (do not use an income statement) C) which line should the company discontinue? Briefly explain
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