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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
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. int ences Segreted Income Statement for Mohave's Sand Trap Beach Umbrella Products Indigo Verde Alul Total Sales revenue $60,000 $60,00 $30,000 $150,000 Variable costs 34, 31.000 26,000 91, Contribution margin $25,000 $29,000 $ 4,000 Less Direct fixed costs $ 59,000 1,900 2,500 2.000 6.400 Segment margin $24,100 $26,500 $ 2.000 $ 52,600 Conton fixed costs 12,840 12,840 8.920 46.600 Net operating income (los) 5.6.260 53,660 510.920) 5 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 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 (L055) Req 18 )
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