Answered step by step
Verified Expert Solution
Question
1 Approved Answer
M7-7 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2, 7-5] Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as
M7-7 (Algo) Analyzing Keep-or-Drop Decision [LO 7-2, 7-5] Blowing Sand Company produces the Drafty model fan, which currently has a net loss of $45,000 as follows: Sales revenue Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Lesst Common fixed costs Net operating income (loss) Drafty Model $170,000 119,000 $ 51,000 42,000 $ 9.000 54,000 545,000) Eliminating the Drafty product line would eliminate $42,000 of direct fixed costs. The $54,000 of common fixed costs would be redistributed to Blowing Sand's remaining product lines. Will Blowing Sand's net operating income increase or decrease if the Drafty model is eliminated? By how much? Total Profit Decreases by 5 3 ,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started