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Maxwell, Inc. manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000
Maxwell, Inc. manufactures and sells two lines of fishing rods. During the most recent accounting period, the Pro line and the Novice line sold 15,000 and 2,000 units, respectively. Management is considering eliminating the Novice line. The company's most recent financial statements are shown below: Pro Novice Sales $900,000 $240,000 Less cost of goods sold: Unit-level production costs 600,000 135,000 Depreciation, production equipment 125.000 50,000 Gross margin $175,000 $ 55,000 Less operating expenses: Unit-level selling and admin. costs 40,000 65,000 Corporate-level facility costs (fixed) 36,000 36,000 Net Income / (loss) $99,000 $(46,000) What are the relevant revenues, relevant costs, and contribution to profit of producing the Novice line fishing rods? Relevant revenue Relevant costs: Contribution to profit Also, answer the following question: Based on this information, the company should_circle one) A) Eliminate the Novice line because it is operating at a loss. B) Keep the Novice line because it contributes $40,000 to total profitability. C) Keep the Novice line because it contributes $55,000 to total profitability. D) It is impossible to determine with the given information
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