If starz is being eliminated why are galaxy numbers used in the eliminate starz column for the variable costs? why are fixed costs used in relevant analysis? does 15% increase in sales matter?

Amoucted relevant cost analysis of one of its product lines that has only two products, Galey and Stars Sales decand the purchase corts increasing them is considering dropping start products and only selling Goley. The com cested costs (het corporate and selling/administration to products on basis of sales revenue. When the CEO of the open trometement, he agreed that start should be dropped this one, sales of Gary respected to increase by 10 the poststructure were in the same Galary 300,000 20.000 230 000 350.000 105.000 245.000 Vanable cost of goods sold 120 00 Gross margin Operating Expenses Fred corporate costs Variable selling and administration Fand selling and administration Total Operating Expenses Operating income foss 80 000 30.000 9000 95.000 23.000 245.000 13.000 119.000 111.000 Find the expected change in annual short-term operating income by dropping Stars and selling only Galaxy 300 000 70,000 30.000 200.000 300 000 0.15 = 45,000 350.000 105000 95.000 150.000 45,000 - 150,000 - 150,000 tos tram dropping Stare What strategic factors should be considered? 1 A firm conducted a relevant cost analysis of one of its product lines that has only two products, Galaxy and Starz Sales for Start are decreating and the purchase costs increasing the firm is considering dropping Starz products and only selling Galaxy The Company allocates fixed costs (both corporate and selling/administration to products on basis of sales revenue when the CEO of the company saw the income statement, he agreed that Starz should be dropped. If this is done, sales of Galaxy are expected to increase by 15% next year, the cost structure will remain the same Starz Galaxy 300,000 70.000 230,000 350,000 105000 245,000 Sales Variable cost of goods sold Gross margin Operating Expenses Fixed corporate costs Variable selling and administration Fixed selling and administration Total Operating Expenses Operating income (loss) 80,000 30,000 9000 120,000 95,000 33.000 248 000 3 000) 119.000 111 000 A Find the expected change in annual short-term operating income by dropping Starz and selling only Galaxy 300,000 70,000 30.000 200,000 300,000 x 0.15 = 45,000 350,000 105,000 95.000 150,000 45,000 - 150,000 = 150,000 Loss from dropping Starz B What strategic factors should be considered