Question
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
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