Mohave Corp. is considering eliminating a product from its Sand Trap line of beach umbrellas. This collection is aimed at people who spend time on the beach or have an outdoor patio near the beach. Two products, the Indigo and Verde umbrellas, have impressive sales. However, sales for the Azul model have been dismal. Mohave's information related to the Sand Trap line is shown below sepented Income statement for have's Sand Trap Heach Umbrella Products Indigo Verde Azul Total Sales revenue $50, $60,000 $30,000 $150,000 Variable costs 34,00 31,000 26,00 91,000 Contribution margin $26,000 $29,000 $4,000 $59,000 Less Direct fixed costs 1.900 2.500 2,000 6,400 Segment margin $24,100 $26,500 $ 2,000 $ 52,600 Common fixed costs" 17,840 17,840 8,920 44 600 Net operating income (loss) $ 0.260 $ 8,660 56.920) $ 8.000 "Allocated based on total sales revenue Mohave has determined that eliminating the Azul model would cause sales of the Indigo and Verde models to increase by 10 percent and 15 percent respectively. Variable costs for these two models would increase proportionately. Although the direct fixed costs could be eliminated, the common fixed costs are unavoidable. The common fixed costs would be redistributed to the remaining two products RY 1-a. Complete the table given below, assuming Mohave Corp drops the Azul line. 1-b. Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? 2. Should Mohave drop the Azul model? 3-o. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. 3-b. Should Mohave drop the Azul model? 3-c. What is the increase or decrease in the net operating income of Mohave? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg2 ROJA Reg 30 Req 30 Complete the table given below, assuming Mohave Corp. drops the Azul line. (Do not round intermediate calculations. Round Common Fixed Costs to the nearest whole dollar.) Indigo Verde Total Sales Revenue Variable Costs Contribution Margin Direct Fixed Costs Segment Margin Common Fixed Costs Net Operating Income (Loss) Complete this question by entering your answers in the tabs below. Reg 3C Reg 1A Req 18 Reg 2 Reg 3A Reg 38 wil Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? Change in Net Operating Income (Loss) Complete this question by entering your answers in the tabs below. Req1A Reg 1B Reg 2 Reg 3A Reg 38 Roq 30 Should Mohave drop the Azul model? Yes ONO Complete this question by entering your answers in the tabs below. Req1A Req 18 Reg 2 Reg 3A Reg 38 Req3 Complete the table given below assuming that Mohave had no direct fixed overhead in its production Information and the entire $51,000 of fixed cost was common fixed cost. Change in Contribution Mergin Contribution Margin Gained on Indigo Contribution Margin Gained on Verde Contribution Margin Lost on Azul Net Increase in Contribution Margin Change in Fixed Costs Net Change in Profit if Azul is Eliminated Reg2 Reg 38 > Complete this question by entering your answers in the tabs below. Rega Heg Reg Red Hoq sted Should Mohave drop the Azul model? Yes No Complete this question by entering your answers in the tabs below. Reg Root Reg 16 Reg 2 RO Reg 30 What is the increase or decrease in the net operating income of Mohave? Change in Net Operating Income Los)
