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Jeff's Pet Store is an independent pet store located in Memorial in Houston, Texas. Jeff collects and reports operating data by product line, with all
Jeff's Pet Store is an independent pet store located in Memorial in Houston, Texas. Jeff collects and reports operating data by "product line," with all revenues and costs being placed into one of three summary categories: (1) dogs, (2) cats, (3) reptiles & fish. For the most recent year of operations, Jeff reported the following results: Dogs Cats Reptiles & Fish Total Revenue $218,000 $142,500 $92,500 $453,000 Variable Costs 87,200 42,750 46,250 176,200 Contribution Margin $130,800 $99,750 $46,250 $276,800 Traceable fixed costs 31,500 22,600 27,500 81,600 Common fixed costs* 35,000 35,000 35,000 105,000 Profit $64,300 $42,150 ($16,250) $90,200 * Common fixed costs related to rent. Since dogs, cats and reptiles & fish use one-third of the available space, Jeff allocates these costs equally among the three pet related categories. While pleased with his overall profit and the profit on dogs and cats, Jeff is concerned about the loss on reptiles and fish. He is thinking about discontinuing the reptiles and fish product line, and using the space to expand his offering of dogs and cats and their related supplies. Jeff believes this option would increase both dog and cat revenue by 12%; however, it would also increase dog-related traceable fixed
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