Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below: Books Music Videos Total
Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:
Books | Music | Videos | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Units sold | 1,000 | 2,000 | 2,000 | 5,000 | ||||||||||
Revenue | $ | 20,000 | $ | 40,000 | $ | 25,000 | $ | 85,000 | ||||||
Variable departmental costs | 17,000 | 22,000 | 12,000 | 51,000 | ||||||||||
Direct fixed costs | 1,000 | 3,000 | 2,000 | 6,000 | ||||||||||
Allocated fixed costs | 7,000 | 7,000 | 7,000 | 21,000 | ||||||||||
Net income (loss) | $ | (5,000 | ) | $ | 8,000 | $ | 4,000 | $ | 7,000 |
The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines. What will happen to profits if Mercer discontinues the Books product line?
If Mercer discontinues the Books product line profit will select an option increasedecrease by $enter a dollar amount |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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