Question
Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The
Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment.
| MARINETTE COMPANY Income StatementCanoe Segment | ||||||
| Sales | $ | 3,600,000 | ||||
| Variable costs | ||||||
| Direct materials | $ | 770,000 | ||||
| Direct labor | 820,000 | |||||
| Variable overhead | 620,000 | |||||
| Variable selling and administrative | 360,000 | |||||
| Total variable costs | 2,570,000 | |||||
| Contribution margin | 1,030,000 | |||||
| Fixed costs | ||||||
| Direct | 695,000 | |||||
| Indirect | 620,000 | |||||
| Total fixed costs | 1,315,000 | |||||
| Net income | $ | (285,000 | ) | |||
1. If canoes are discontinued, calculate the net income lost or gained. 2. Should management discontinue the manufacturing of canoes?
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
12th Edition
9780073526706
