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Fudge Factory has three product lines, Chocolate, Penuche, and Peanut Butter. The following information is available: Chocolate Penuche Peanut Butter $100,000 $90,000 $89,000 76,000 48,000
Fudge Factory has three product lines, Chocolate, Penuche, and Peanut Butter. The following information is available: Chocolate Penuche Peanut Butter $100,000 $90,000 $89,000 76,000 48,000 79,000 $24,000 $42,000 $10,000 Sales Variable costs Contribution margin Fixed costs: Avoidable Unavoidable Operating income 9,000 5,000 $10,000 17,000 9,000 $16,000 7,000 8,000 $(5,000) Should any product line be eliminated/discontinued? Explain why or why not by showing your calculations and the impact on operating income. If the Peanut Butter product line is discontinued and the space formerly used to produce the Peanut Butter product line is rented out for $20,000 per year, will the overall company operating income increase or decrease? By how much? Should the Peanut Butter product line be eliminated if the space can be rented for $20,000 per year? Show all your calculations
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