Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ForessVillage sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's retail floor space. The president ofForessVillage

ForessVillage sells home, and office furniture. Currently the home product line takes up approximately 50 percent of the company's retail floor space. The president ofForessVillage is trying to decide whether the company should continue offering office furniture or concentrate on home furniture. Below is a product line income statement for the company. If office furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of home furniture can increase by15percent without affecting direct fixed costs. Allocated fixed costs are assigned based on relative sales.

Home

Furniture

Office

Furniture

Total

Sales$1,440,000$1,108,800$2,548,800Less cost of goods sold936,000806,4001,742,400Contribution margin504,000302,400806,400Less direct fixed costs:Salaries176,400176,400352,800Other55,44055,440110,880Less allocated fixed costs:Rent12,7409,83822,578Insurance3,5402,5106,050Cleaning3,8303,2047,034President's salary73,58058,662132,242Other6,8105,56212,372Net income / (loss)$171,660$(9,216)$162,444

Determine whetherForessVillage should discontinue the office furniture line and the financial benefit (cost) of dropping it.(Round answer to 0 decimal places, e.g. 5,275.)

Net income without Office Furniture is $ (enter net income without office furniture in dollars). The company should drop/should not drop the Home Office Furniture prod

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles Volume 2

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

8th Canadian Edition

1119502551, 1-119-50255-5, 978-1119502555

More Books

Students also viewed these Accounting questions

Question

The relevance of the information to the interpreter

Answered: 1 week ago

Question

The background knowledge of the interpreter

Answered: 1 week ago