ERRE Here is the problem: Following are sales and other operating data for the three products, A, B, and C. produced and sold by Sanger Company: A B C $100,000 $300,000 $150,000 Sales Manufacturing costs: Fixed $30,000 $140,000 $170,000 Variable Total manufacturing costs Selling and administrative costs: Fixed $10,000 $110,000 $120,000 $30,000 $50,000 $80,000 Variable $10,000 $20,000 $30,000 $10,000 $10,000 $20,000 $6,000 $15,000 $21,000 Total selling and admin costs Total costs $200,000 $140,000 $101,000 Net income (loss) $100,000 $10,000 $ (1,000) In view of the net loss for Product C, Sanger's management is considering dropping that product. All variable costs are direct costs and would be eliminated if Product C were dropped. Fixed costs are all considered indirect costs, and no fixed costs would be eliminated if Product C were dropped. Assume that the space used to produce Product C would be left idle. A. Prepare a comparative income statement showing the total net income for the firm both with and without Product C. B. Prepare a brief analysis of just the relevant revenues and costs pertaining to just Product C. C. Would you recommend the elimination of Product C? A B D E F G 6 A Sanger Company Income Statement 7 8 With With Only Products Products A,B,&C A&B Sales Manufacturing costs: Fixed Variable Total manufacturing costs Selling and administrative costs: Fixed Variable Total selling and admin costs Total costs 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Net income B Sanger Company Relevant Revenues and Costs for Just Product C Relevant revenues for product C Relevant costs for product C: Variable mnaufacturing costs Variable selling & admin costs Total relevant costs Relevant contribution margin for C 42 43 44